Controlling Shareholders and Intra-Group Transactions: A Special Framework

• Autore: Alperen Af?in Gözlügöl
• Carica: Leibniz Institute for Financial Research SAFE
• Pagine: 67-91

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hps://doi.org/10.6092/issn.2531‐6133/15236

Received:01Sep.2021|Accepted:10Jan.2022|Published:19July2022

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ControllingShareholdersandIntra‐GroupTransacons:A

SpecialFramework

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AlperenAfşinGözlügölisanAdvancedResearcherintheLaw&FinanceclusteroftheLeibniz

InstituteforFinancialResearchSAFE,FrankfurtamMain(Germany).Forvaluablecomments,the

authorwouldliketothankWolf-GeorgRingeandtheanonymousreviewer.

@gozlugol@safe-frankfurt.de

ID0000-0001-7104-7197

ABSTRACT

Controllingshareholdersandtheiractivitiesinpubliclytradedcompanieshavelongstirred

debateandcontroversy.Stilldominatingthecorporatelandscapeacrosstheworld,concentrated

ownershiphasbeenassociatedwithbothextractionofprivatebenefitsofcontrol(P.B.C.)and

entrepreneurship.Drawingonthetheoriesoncorporatecontrol,thisarticlecontributesto

accomplishingthelaw’sgoalofpromotingtheentrepreneurialroleofcontrollingshareholders,

yetkeepingP.B.C.extractionunderrestraintatthesametimeinthespecificcontextof

intra-grouptransactions–abreedinggroundforbothP.B.C.extractionandtheimplementation

ofanentrepreneurialideabycorporatecontrollers.Thearticlesubmitsnuancedanddifferent

meansofoverseeingintra-grouptransactionsinawaythatwouldoptimallyallowthe

implementationofabusinessplanbyacontrollingshareholderinacorporategroupandprotect

minorityshareholders,alongwiththeexaminationofotherissuesthatarerelevanttothe

oversightofintra-grouptransactions.

KEYWORDS

ControllingShareholders;Related-partyTransactions;Intra-groupTransactions;CorporateGroups;

MinorityShareholderProtection

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CONTROLLINGSHAREHOLDERSANDINTRA-GROUPTRANSACTIONS

TABLEOFCONTENTS

Introduction............................................68

1.CorporateControllers:ThievesorEntrepreneurs.......................70

2.Intra-GroupTransactions....................................72

2.1.Intra-GroupTransactionsInvolvingHomogenousProducts/Services......75

2.2.Intra-GroupTransactionsInvolvingDifferentiated/SpecialProducts/Services.77

2.3.OtherIssuesRegardingtheOversightofIntra-GroupTransactions........86

Conclusion.............................................90

INTRODUCTION

Inmostjurisdictionsacrosstheworld,shareownershipofpubliccompaniesis

characterisedbyablockholdingthateffectivelygrantsthecontrolofthecompanyto

thatshareholder.1Whiletheexistenceofacontrollingshareholderisassociatedwith

certainbenefits,italsogivesrisetoaconflictofinterestbetweenthecontrolling

shareholdersandminorityshareholders.2Mostimportantly,controllingshareholders

canextractP.B.C.3tothedetrimentofthecompanyandthus,ofminorityshareholders.4

Corporatecontrollerstakedifferentshapes.5Andthequestionofwhythese

corporatecontrollersholdontothecontrolofthecompanyratherthandisposingofthe

1OnlyintheU.S.,theU.K.andpartlyinJapan,dispersedshareownershipismorecommon.See,e.g.,Rafael

LaPortaetal.,CorporateOwnershipAroundtheWorld,54J.F

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.471(1999);MaraFaccio&LarryH.P.Lang,

TheUltimateOwnershipofWesternEuropeanCorporations,65J.F

IN

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CON

.365(2002);JulianFranksetal.,The

OwnershipofJapaneseCorporationsinthe20thCentury,27R

EV

.F

IN

.S

TUD

.2580(2014);StijnClaessensetal.,The

SeparationofOwnershipandControlinEastAsianCorporations,58J.F

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.E

CON

.81(2000).

2SeeJohnArmour,HenryHansmann&ReinierKraakman,AgencyProblemsandLegalStrategies,inT

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29,30(ReinierKraakmanetal.eds.,2017).

3Onprivatebenefitsofcontrol,seeRonaldJ.Gilson,ControllingShareholdersandCorporateGovernance:

ComplicatingtheComparativeTaxonomy,119H

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.1641,1663(2006)(distinguishingbetweenpecuniary

privatebenefitsofcontrolandnon-pecuniaryprivatebenefitsofcontrol).Theformerisdefinedas“the

nonproportionalflowofrealresourcesfromthecompanytothecontrollingshareholder”whilethelatter

indicates“formsofpsychicandotherbenefitsthat,withoutmore,involvenotransferofrealcompany

resourcesanddonotdisproportionatelydilutethevalueofthecompany’sstocktoadiversifiedinvestor

suchassocialorpoliticalstatusresultingfromthecontrolofalargecompany.”Id.at1663–64.

4Theseprivatebenefitsofcontrolaredocumentedinstudiesthatexaminethecontrolpremiachargedfor

controllingblocksorthepricedifferentialsbetweenhigh-andlow-votingshares.SeeMichaelJ.Barclay&

CliffordG.Holderness,PrivateBenefitsfromControlofPublicCorporations,25J.F

IN

.E

CON

.371(1989);Alexander

Dyck&LuigiZingales,PrivateBenefitsofControl:AnInternationalComparison,59J.F

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.537(2004);Tatiana

Nenova,TheValueofCorporateVotingRightsandControl:ACross-CountryAnalysis,68J.F

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.E

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.325(2003).

Somestudiesalsoshowthatthemarketvaluesthesamecashflows/investmentsdifferently,dependingon

whethertheycanbeexpropriatedbycontrollingshareholdersornot,whichreflectsagainprivatebenefits

ofcontrol.See,e.g.,BernardS.Blacketal.,DoesCorporateGovernancePredictFirms’MarketValues?Evidencefrom

Korea,22J.L.E

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.&O

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.366(2006);BronwynH.Hall&RaffaeleOriani,DoestheMarketValueR&DInvestment

byEuropeanFirms?EvidencefromaPanelofManufacturingFirmsinFrance,Germany,andItaly,24I

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.971(2006).

5Corporatecontrollerscanbecompanies,individuals,families,institutionalinvestors,thestateetc.

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