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16 Eur. Bus. Org. L. Rev. 1 (2015)

handle is hein.journals/eunbuioiz16 and id is 1 raw text is: Eur Bus Org Law Rev (2015) 16:1 37 DOI 10.1007/s40804-015-0001-3 \ I 1 1 1 Related Party Transactions: Policy Options and Real-World Challenges (with a Critique of the European Commission Proposal) Luca Enriques Published online: 10 March 2015 © T.M.C. Asser Press 2015 Abstract This paper provides a legal and policy analysis of transactions between a corporation and one of its 'related parties'. It first highlights the reasons why related party transactions (RPTs) are so common around the world. Next, it better identifies the phenomenon as a specific form of potentially abusive behaviour by dominant shareholders and managers, i.e., as an instrument for tunneling, asking why many jurisdictions provide for specific regulations on RPTs in addition to general rules or standards on tunneling. Then, it describes the main legal tools available to prevent corporate agents from diverting value from the corporation via RPTs. Further, it provides a (partially) critical assessment of the measures put forth by the European Commission to harmonise rules on RPTs within the EU, based on the previous analysis of individual legal tools. Finally, it shows that no regulation of RPTs (or tunneling) can succeed in preventing minority shareholder expropriation in the absence of sophisticated enforcement actors (specialised courts and/or active and committed securities regulators) and non-legal supporting institutions, like inde- pendent financial media and anti-tunneling social norms. Keywords Corporate governance - Dominant shareholders - Corporate groups Private benefits of control - Tunneling Related party transactions - Self-dealing Conflict of interests - MOM approval Independent directors - Mandatory I wish to thank John Armour, Andris Hanik, Merritt Fox, Ron Gilson, Zohar Goshen, Michael Klausner, Georg Ringe, Chuck Whitehead and especially Amir Licht and Alessio Pacces for their comments on an earlier draft. Fianna Jurdant and Nadia Zainuddin provided useful information on Asian reforms focusing on related party transactions. Usual disclaimers apply. Throughout this paper, by 'companies' are meant listed companies unless the context shows otherwise; correspondingly, the description of legal rules in a given jurisdiction justifies no inference on what its rules for non-listed companies are. A shorter version of this paper will be published in Gordon and Ringe (2015). L. Enriques (E) Oxford Law Faculty, University of Oxford and ECGI, St. Cross Building, St. Cross Road, Oxford OXI 3UL, UK e-mail: luca.enriques@law.ox.ac.uk I Springer 0 ASSER PRES;

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