Related party transactions: Approval by the majority of the minority of disinterested shareholders
DOI:
https://doi.org/10.18272/ulr.v9i1.2582Keywords:
Related-party transactions, self-dealing, tunneling, controlling shareholders, majority of the minorityAbstract
Related-party transactions are a type of self-dealing operations used by majority shareholders to the detriment of minority shareholders. Ecuador is the first Latin American country to regulate these transactions, serving as a reference for neighboring countries. However, its regulation falls short by regulating an exhaustive list of transactions, leaving aside other types of conflicts that could emerge. Likewise, Ecuadorian regulation gives much more importance to directors than to majority shareholders, evidencing an incomplete legislation to provide solutions to mitigating the agency problem that exists between shareholders, instead of regulating the conflicts of interest among shareholders and the company"™s directors. This essay examines the existing mechanisms in comparative law that mitigate this type of abuse from controlling shareholders. For this reason, the disclosure of information, ex ante approval: through the majority of the minority and ex post judicial review are analyzed, to determine which mechanism is more suitable for the Ecuadorian context.
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