3.4.3.3.1 Evolution of fiduciary duty in a close company

As a matter of principle, corporate officers and directors owe fiduciary duties to the corporation, namely the duty of care and the duty of loyalty.1 Directors are prohibited from self-interested actions and must act in the interest of the corporation.2 Individual shareholders in the past had no obligations or duties to the corporation or to other shareholders, except the obligation to pay the price of their shares.3 In this sense, majority shareholders, as long as they did not commit illegal or fraudulent acts, were free to exercise whatever powers they were granted under the statutes, corporation's charter and bylaws.4 They did not need to concern themselves with the interests of their fellow shareholders.5 Neither the directors nor the controlling shareholders owed fiduciary duties to the minority shareholders.

The issue of the almost unlimited power exercised by the majority is constantly revisited, especially in the context of close companies. The general nature of a close company, a small number of shareholders, owner management, a blurry line between shareholders and directors, informal way of conducting the business, strong majority power, makes opportunistic behaviour which can be most destructive to the success of a business universa1.6 For this reason, courts now are more inclined to impose fiduciary duties on majority shareholders in a close corporation than in a public one and in recent years, legislators and courts have increasingly looked to partnership-like fiduciary duties in solving majority-minority problems in a close corporation.7 A new trend is thus reflected in the current case development in the US: majority shareholders owe fiduciary duties to minority shareholders, so the exercise of their majority power may not outweigh the minority shareholders' legitimate interests.