FIDUCIARY DUTIES IN CORPORATE LAW NICK CHIZHENKOV EXCLUSIVELY

FIDUCIARY DUTIES IN CORPORATE LAW NICK CHIZHENKOV EXCLUSIVELY FOR HSE LEGAL ENGLISH CLUB

WHAT IS FIDUCIARY DUTY? ü A DUTY IMPOSED BY STATUTE OR CONTRACT AS WELL AS CREATED BY CASE LAW ü BASED ON FACTUAL CIRCUMSTANCES UNDERLYING THE RELATIONSHIP OF THE PARTIES • Implied influence or dependence of one person upon another (e. g. tutor and ward) • Inequality of the parties (even business intelligence and knowledge of substantial facts are taken into consideration) • Acting of one person for another (e. g. principal and agent, administrator and heir, CEO and company), etc. ü ARISING OUT OF TRUST AND CONFIDENCE PROVIDED BY ONE PARTY (BENEFICIARY) TO ANOTHER IF THE SECOND PARTY (FIDUCIARY) IS AWARE OF IT

FIDUCIARY DUTIES IN THE U. S. CORPORATE LAW ü DEVELOPED PRIMARILY BY COMMON LAW (CHARITABLE CORP. V. SUTTON, 1742) ü ESTABLISHED ALSO IN MBCA (§ 8. 31, § 8. 62, § 8. 63) ü DUTY OF LOYALTY: • No self-dealing (Guth v. Loft, Inc. , Del. 1939) • Business Judgement Rule (Aronson v. Lewis, Del. 1984) ü DUTY OF CARE: • Gross negligence is not an option (Francis v. United Jersey Bank, N. J. 1981) • Acting on a fully-informed basis required (Smith v. Van Gorkom, Del. 1985)

CORPORATE FIDUCIARY DUTIES IN THE U. K. ü GENERAL DUTIES OF DIRECTORS ARE CODIFIED (SECTIONS 170 -177 OF THE COMPANIES ACT 2006): • Duty to act within powers • Duty to promote the success of the company • Duty to exercise independent judgment • Duty to exercise reasonable care, skill and diligence (non-fiduciary? ) • Duty to avoid conflicts of interest • Duty not to accept benefits from third parties • Duty to declare interest in proposed transaction or arrangement

FIDUCIARY DUTIES IN RUSSIAN CORPORATE LAW ü DUTY OF GOOD FAITH AND DUTY OF REASONABLENESS ü PRESUMPTIONS AND COUNTER-PRESUMPTIONS OF BREACH PROVIDED BY THE HIGHER COURT OF ARBITRATION ü LIABILITY FOR BREACH OF DUTY OF REASONABLENESS CAN BE PRECLUDED BY SHAREHOLDERS OF A PRIVATE JOINT-STOCK COMPANY (BUT NOT THE LIABILITY OF A CONTROLLING SHAREHOLDER)

IN CASE OF A BREACH ü RECOVERY OF DAMAGES IN THE U. S. (IN SOME STATES IS ALSO POSSIBLE TO RECOVER PUNITIVE DAMAGES) AND RIGHT TO CHALLENGE A TRANSACTION UNDER THE COMMON LAW ü RECOVERY OF DAMAGES IN THE U. K. AND RIGHT TO CHALLENGE A TRANSACTION UNLESS DIRECTORS MAKE A FULL DISCLOSURE OF THE NATURE OF THEIR INTEREST (ALLCO FUNDS MANAGEMENT LIMITED V TRUST CO (RE SERVICES) LTD [2014]) ü RECOVERY OF DAMAGES UNDER RUSSIAN CIVIL LAW (ART. 53. 1 OF THE CIVIL CODE) AND PROVISIONS GOVERNING EXTRAORDINARY TRANSACTIONS OF JOINT-STOCK AND LIMITED COMPANIES BUT THE LATTER IS QUESTIONABLE

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