Research On Causes And Countermeasures Of Controlling Shareholders’ Breach Of Fiduciary Duty

As the number of companies in China increases year by year,it is not uncommon for controlling shareholders to actually control the company as de facto directors due to equity advantages or other contractual arrangements.Due to the advantage of control right,controlling shareholders’ actions that harm the interests of non controlling shareholders also occur from time to time.However,the current law does not provide substantive provisions for the protection of the interests of non controlling shareholders,which inevitably intensifies the contradictions between shareholders and is detrimental to the orderly development of the market economy.Fiduciary duty can make up for the shortcomings of legal provisions,explore the causes and solutions of controlling shareholders’ breach of trust,which helps to regulate the behavior of controlling shareholders and protect the interests of non controlling shareholders.First and foremost,this article analyzes the legislative status of fiduciary duty of controlling shareholders and others,and explains the definition of fiduciary duty of controlling shareholders based on the legislative status.Then,empirical analysis is conducted on cases of controlling shareholders violating fiduciary duties and harming the interests of other non controlling shareholders in the past five years.Meanwhile,this article classifies the reasons for the violation of fiduciary duty by controlling shareholders,the results of punishment,and the reasons for adjudication.Additionally,based on the current situation of corporate governance,this study concludes that there are three main reasons for the violation of fiduciary duty by controlling shareholders.One is the limited ability of non controlling shareholders to participate in corporate governance,including the inconsistent opinions of non controlling shareholders and the reduction of voting rights of non controlling shareholders caused by the dual voting structure.The second is the failure of the supervisory mechanism for controlling shareholders’ breach of trust,including the vulnerability of the independence of the board of supervisors to the influence of controlling shareholders and the insufficient supervisory ability of the board of supervisors.The third is that the accountability mechanism for breach of trust is not sound,including indirect losses in direct litigation that cannot be compensated,losses of shareholders in derivative litigation that cannot be directly compensated,non controlling shareholders’ weak capacity to present evidence,and relatively light liability for breach of trust of controlling shareholders.Last but not least,this study combines relevant theories such as principal-agent theory,corporate contract theory,shareholder equality theory,good faith principle,and proportional principle with the basic value of controlling shareholders’ fiduciary duty to propose measures to prevent controlling shareholders from violating fiduciary duty.Firstly,enhance the ability of non controlling shareholders to participate in corporate governance,including improving the consistency of non controlling shareholders with the Internet and limiting the voting rights of controlling shareholders who are under a dual voting structure.Secondly,optimize the supervision mechanism of controlling shareholders’ fiduciary duty,including improving the independence of the board of supervisors and giving full play to the supervision role of the CPC on controlling shareholders.Thirdly,improve the accountability mechanism for controlling shareholders’ breach of trust,including supporting indirect losses in direct suits,encouraging direct suits,reducing the burden of proof on non controlling shareholders,and introducing the right of attribution and punitive damages into the fiduciary duty of controlling shareholders.