The Law and (Some) Finance of Related Party Transactions: An Introduction

30 Pages Posted: 19 Jul 2018  

Luca Enriques

University of Oxford Faculty of Law; European Corporate Governance Institute (ECGI)

Tobias H. Troeger

Goethe University Frankfurt - Research Center SAFE; European Corporate Governance Institute (ECGI); European Banking Institute

Date Written: July 15, 2018

Abstract

This paper is the introductory chapter of Luca Enriques and Tobias Tröger (eds.), The Law and Finance of Related Party Transactions (Cambridge University Press: forthcoming). Its goal is to sketch out the individual chapters’ contributions to the scholarly and policy debates on the adequate regulation of related party transactions (RPTs). For that purpose, we scope the issue by highlighting the principal costs and benefits of shareholder control, which allows both the implementation of entrepreneurial vision and various forms of rent-seeking. We next proceed by putting the challenges of regulating RPTs into the broader context of conflicts of interest and tunneling techniques. Against this background, we then turn to the main regulatory options available for legislators (independent/disinterested director approval, majority of the minority approval, ex post fairness review, and involvement of supervisory agencies), highlighting some of the key insights on each of them from individual chapters. Finally, we show how the chapters in the book can also inform European legislators who are currently in the process of implementing the revised Shareholder Rights Directive rules on RPTs.

Keywords: Conflicts of Interest, Controlling Shareholders, Fairness Review, Independent Directors, Private Benefits of Control, Majority of the Minority Approval, Public Enforcement, Related Party Transactions, Shareholder Rights Directive, Tunneling

JEL Classification: D23, G32, G34, K22

Suggested Citation

Enriques, Luca and Tröger, Tobias Hans, The Law and (Some) Finance of Related Party Transactions: An Introduction (July 15, 2018). European Corporate Governance Institute (ECGI) - Law Working Paper No. 411/2018. Available at SSRN: https://ssrn.com/abstract=3214101 or http://dx.doi.org/10.2139/ssrn.3214101

Luca Enriques (Contact Author)

University of Oxford Faculty of Law ( email )

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

Tobias Hans Tröger

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany
+49 69 798 34391 (Phone)
+49 69 798 34536 (Fax)

HOME PAGE: http://safe-frankfurt.de/research/all-researchers/researchers-details/showauthor/prof-dr-tobias-troe

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.global/users/tobias-tr%C3%B6ger

European Banking Institute ( email )

Frankfurt
Germany

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