3.4.3.3.4 Summary

Cases in Massachusetts take the lead in exploring the limits of fiduciary duties in close corporations and are constantly referred to or cited by other jurisdictions. They pioneer in "developing an effective cause of action for minority shareholders who have been denied their fair share of benefits in close corporations."1

At first, the court provided strong protection to minority shareholders in close corporations by introducing a partnership-like fiduciary duty. The existence of such a strict fiduciary duty was apparently a powerful weapon for the minority shareholders in fighting for their rights against opportunistic behaviour displayed by the majority shareholders.2 But the notion of this heightened fiduciary duty itself was not without problems in enforcement, for instance, legitimate actions in conformity with legal provisions could be struck down, which posed obstacles to effective business management from the majority's point of view. The Massachusetts court therefore relaxed the enhanced duty in its subsequent cases by introducing a two-step test, and it recently showed an inclination for the standard of `defeat of reasonable expectations'. 3