chapter  12
20 Pages

THE REGULATION OF INTRA-GROUP TRANSACTIONS

1 INTRODUCTION

This essay is concerned with the ways in which UK company law regulates transactions between a parent company and its partly owned subsidiary. One example of such a subsidiary is the corporate joint venture where one party has a majority interest; the joint venture in Scottish Co-operative Wholesale Society Ltd v Meyer1 was just such a subsidiary. The common law fiduciary duties which directors, shadow directors and, arguably, controlling shareholders owe to the subsidiary company are one source of such regulation; Part X of the Companies Act 1985 is another. When it comes to enforcement of this regulation by minority shareholders in the subsidiary, the derivative action and s 459 of the Companies Act also come into play. It is argued that company law ought to impose fiduciary duties on the majority shareholder in the corporate joint venture. UK company law does not impose this duty in clear terms. This essay will consider whether or not recent reform proposals of the Company Law Reform Steering Group (the Steering Group) improve matters in this respect. The reform proposals under consideration are principally those set out in Modern Company Law for a Competitive Economy – Final Report2 which largely refers to the proposals made out in the earlier documents issued by the Steering Group Modern Company Law for a Competitive Economy – Completing the Structure3 and Modern Company Law for a Competitive Economy – Developing the Framework.4