The Evolution and Challenges of Directors' Duty of Loyalty
The Evolution and Challenges of Directors' Duty of Loyalty

Author(s): Adina Ponta
Contributor(s): Catalin-Silviu Sararu (Editor)
Subject(s): Law, Constitution, Jurisprudence
Published by: Societatea de Stiinte Juridice si Administrative
Keywords: duty of loyalty; good faith; conflict of interest; corporate opportunity doctrine; fiduciary duties; agency
Summary/Abstract: The duty of loyalty is the core of the fiduciary relationship between ownership and effective control of a company. This paper aims at identifying the contours of this heterogeneous fiduciary duty in corporate law, absent of clearly established legal limits. The objective is to highlight the pattern of this duty based on evolutionary case law, from the beginning of confluences between legal and microeconomic elements, by emphasizing the shades of current social and moral norms. The article renders both exposures of this duty, from the minimalist conception, "lack of betrayal", to the broad dimension of "active commitment". Various case law examples contribute to the identification of overlaps between loyalty and good faith, and of conflicts between applicability of the duty of care and duty of loyalty. The paper exposes a comparative analysis of the duty of loyalty among the jurisdictions of the European Union and Romania, emphasizing the influences of agency rules and traditional fiduciary values within civil law. The expansion of the duty is reflected by addressing the notions of conflict of interest and corporate opportunity doctrine. The findings reveal case law substantiated factors which facilitate the identification of duty of loyalty violations and differentiate them from good faith situations, where jurisprudence mainly facilitates the exclusion of this fiduciary duty.

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