On Some Problems of Applying the Principle of Farness in the Internal Activities of Business Corporations

Abstract

Achieving farness in the internal activities of business corporation requires a combination of both organizational and contractual mechanisms, which is due to the dualistic (statutory and contractual) nature of the business corporation. Effectively applied for asset allocation the principle of proportionality cannot fully guarantee fairness in the implementation of management activities, since consolidation of corporate power is required for managerial decision-making. The exercise of power functions by majority shareholders may lead to infringement of the investment interests of minority ones. The solution to the problem is the redemption of the share by the business corporation at the request of the stockholder upon the occurrence (non-occurrence) of certain circumstances, which can be considered as the redemption of an unspecified rent in advance. Despite the existence of special rules in corporate legislation governing the repurchase of shares at the request of a shareholder in order to achieve fairness it is advisable to fix the general rule on the right of a shareholder of a business corporation, taking into account the conditions provided for by law and the charter, to demand the repurchase by a business corporation of his shares in case of violation by the corporation of his reasonable investment expectations.