Self-Dealing, Corporate Opportunities and the Duty of Loyalty - A US, UK and EU Comparative Perspective

Abstract

The paper offers a comparative perspective on the duty of loyalty – encompassing both rules that govern self-dealing and corporate opportunity transactions. It compares the evolution of these two sets of rules in several European jurisdictions and in US Delaware law. The paper begins by comparing the approach to regulating self-dealing and related party transactions under both common law (namely the US and UK) and civil law regimes (focusing on continental Europe). It then turns to the legal development of corporate opportunity rules, and contrasts the approach to corporate opportunities under US law to the less-developed jurisprudence on corporate opportunities in civil law jurisdictions.

Corradi and Helleringer note tensions between the evolution of the law governing self-dealing transactions at the European level, and the lack of harmonization on rules addressing corporate opportunities and continuing divergences in corporate opportunities doctrine across EU jurisdictions. They observe a relaxation of the duty of loyalty in US Delaware law, while there is an asymmetric evolution of its two components, self-dealing and corporate opportunities, in the European context. On the one hand, self-dealing rules have existed in European corporate laws for a long time and have been substantially relaxed in Europe in recent times as they have in the US. On the other hand, corporate opportunities rules have been introduced in most European jurisdictions only throughout the last two decades – without an express possibility of a waiver such as the one granted by DGCL s. 122(17).

The convergence of self-dealing rules may have been facilitated by the harmonization of EU financial market law, which in turn has not affected corporate opportunities rules. Economic agency theory provides a rationale for a hypothetical convergence of self-dealing and corporate opportunities rules, based on their economic function.