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Edited by Hanne S. Birkmose and Konstantinos Sergakis

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Hanne S. Birkmose and Konstantinos Sergakis

The discussion on shareholders’ duties has increasingly gained momentum in the EU and has given rise to the adoption of duties in both company law and capital markets law. However, this discussion must be extended further if the duties that are increasingly imposed on shareholders are to have a genuine effect on the viability of the recent regulatory developments in this area.

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Anita Anand and Christopher Puskas

As shareholder activism influences corporate decision making more and more, the question of whether shareholders, particularly those with a controlling interest, should owe fiduciary duties to other shareholders has become an increasingly conspicuous one in corporate law. The law is certain that directors and senior managers owe a duty of loyalty to the corporation but it remains unsettled regarding duties between the shareholders themselves. This chapter focuses on the duties among shareholders inter se and considers when, if ever, such a fiduciary duty is appropriate.

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Hanne S. Birkmose

Duties imposed on shareholders are no longer a rare and exotic phenomenon in European company and capital market law. Rather, they should be seen as a trend that has gained momentum since the financial crisis. Shareholders’ duties typically apply to all shareholders. However, the nature of the situation sometimes requires that duties be imposed on one or more shareholders. These duties apply to all shareholders in principle but it is a given situation that leads to imposing duties on some shareholders.

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Christopher Van der Elst

For a long period of time it was a common belief that shareholders had no duties vis-à-vis the company. As Hoffman put it for the US, ‘shareholders owe the corporation no legal duties’ and are ‘uniquely blessed by the freedom to do what they will with their capital’. Shareholders’ obligations were limited to the fiduciary duties in close companies ‘akin to the duties partners owe to one another’ and to a prohibition on self-dealing by majority shareholders.

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Corrado Malberti

To understand the scope and nature of the enforcement of shareholders’ duties, it is necessary to compare this type of enforcement with that of contracts and agreements shareholders may have concluded with companies or third parties. In some cases, contractual arrangements may reinforce shareholders’ duties by providing more effective remedies. In other circumstances, contracts may clarify what other shareholders or companies expect from a shareholder or introduce obligations in addition to those mandated by law. However, some¬times, contractual obligations may also conflict with shareholders’ duties and jeopardize the performance of such duties.

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Iris H-Y. Chiu

This chapter focuses on the nature of ‘private’ and ‘public’ enforcement against shareholders in order to critically tease out the differences in terms of their rationales and broad characteristics. The chapter will raise the question whether the boundaries between the two are clear, and the implications for considering the suitable loci for enforcement. It is not a comprehensive study of the sources of law for enforcement but key examples will be raised.

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Konstantinos Sergakis

Enforcement mechanisms are crucial to the viability of businesses and capital markets at large, as they purport to hold accountable legal and natural persons who violate applicable rules, as well as to inculcate a sound compliance culture and sensible market practices into such persons. On the one hand, legal (public and private) enforcement constitutes the core element of a wider EU and inter national trend towards deterrence, dissuasion and compensation. Academic literature has not conclusively determined which enforcement means are preferable. On the other hand, social enforcement (for example, ‘name and shame’) is based on softer tools that inform interested parties of a violation so as to trigger cascading effects on investors, third parties and stakeholders at large.

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Mette Neville and Karsten Engsig Sørenson

Recently, suspension of voting rights has been introduced in the European Union through Directive 2013/50/EU. According to the amended Transparency Directive, this sanction should be available to the relevant authorities in the Member States in case of infringements of the duty to notify major sharehold¬ings. The reason for introducing this sanction is that it is considered a particu¬larly effective sanction by the Commission. This raises the question why, and for which type of infringements, this sanction is effective. These questions will be analysed further in this chapter.

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Jennifer Payne and Elizabeth Howell

The focus in company law has traditionally been on shareholders’ rights rather than shareholders’ duties. While some forms of shareholders’ duties have existed for many years, this is an issue that has come to greater prominence recently. This is due to a number of factors, including a growing recognition of the need to hold institutional investors accountable to their underlying inves¬tors, a trend that is evident in recent amendments to the Shareholder Rights Directive,1 and also a recognition that corporations, and by extension their shareholders, should be held more accountable for the effect they have on soci¬etal issues such as environmental matters.