14 Pages Posted: 11 Jun 2000
Date Written: February 2000
Tunnelling is defined as the transfer of assets and profits out of firms for the benefit of their controlling shareholders. We describe the various forms that tunnelling can take, and examine under what circumstances it is legal. We discuss two important legal principles -- the duty of care and the duty of loyalty -- which courts use to analyze cases involving tunnelling. Several important legal cases from France, Belgium, and Italy illustrate how and why the law accommodates tunnelling in civil law countries, and why certain kinds of tunnelling are less likely to pass legal scrutiny in common law countries.
Suggested Citation: Suggested Citation
Johnson, Simon and La Porta, Rafael and Lopez de Silanes, Florencio and Shleifer, Andrei, Tunnelling (February 2000). NBER Working Paper No. w7523. Available at SSRN: https://ssrn.com/abstract=227602