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

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

Luca Enriques, Tobias Tröger

Series number :

Serial Number: 
411/2018

Date posted :

July 23 2018

Last revised :

July 22 2018
SSRN Share

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

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.
 

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Authors

Professor
Real name:
Tobias Tröger
Research Member
Leibniz Institute SAFE, Goethe University Frankfurt, House of Finance