INTEREST OF THE COMPANY, CORPORATE LAW

University of Turin

INTEREST OF THE COMPANY

Department of Law.

Start

GROUP 18:

• Mihai Andreas Claudiu
• Quaglino Giulia

• Spanti Arianna

Comparison

B.

A.

"WHOSE INTEREST SHALL THE COMPANY DEAL WITH?"

The SHAREHOLDER approach sees as the company's objective the maximization of shareholder's interesrs, putting therefore the focus directly on shareholders - Agency Theory: the agent, that corresponds to the director, should act on behalf of the shareholder's interest in running a business

The STAKEHOLDER approach takes a view that the directors should balance the interests of different constituencies that make up the company, rather han considering the sole interests of shareholders

- PROFESSOR PAUL DAVIES

Conflicts of Interest

02

the Agency Problem

• Key concept of the problem: the agent may be incentivized to act opportunistically

• Three generic problems that might be faced in business firms

1. Conflict between the firm's owners and the managers
2. Conflict between the owners who possess the majority of controlling interests and the minority shareholders
3. Conflict between the firm and the parties with whom the firm contracts

Dodge v. Ford Motor Co.

PARTIES: PLAINTIFFS: John Dodge, Horace dodge DEFENDANT: Ford Motor Co. ISSUE: breach of director’s duty of loyalty, conflict of interest between director and shareholder, violation of the principle of shareholder primacy FACTS: Ford Motor Co stopped paying dividends to Dodge Brothers, a minority stockholders, so they sued Ford Motor company for not following the best interest of the shareholders, preferring the benefit for the consumers and employers

Directive 2012/30 EU

ART 25 (2-5), ART 26.

ART. 25 § 3: The transactions shall be submitted by the administrative or management body to the general meeting for prior approval..., ...The administrative or management body shall present a written report to the general meeting, indicating:

1. the reasons for the transaction;

2. the interest of the company in entering into such a transaction;

3. the conditions on which the transaction is entered into;

4. the risks involved in the transaction for the liquidity and solvency of the company; and;

5. the price at which the third party is to acquire the shares.

ART. 26: ‘’ … Member States shall ensure through adequate safeguards that such transaction does not conflict with the company's best interests.’’

Thanks!