Challenging the Related-Party Transaction Based on a Claim of a Corporation Represented by an Uninterested Minority Participant

Challenging related-party transactions allows the corporation to maintain a stable financial position and prevent the redistribution of corporate assets in favor of unconscientious persons. At the same time only participants who collectively own at least 1 % of the voting shares (votes of the participants) of the company can act on behalf and in the interests of the corporation at present. This approach significantly limits the corporation’s right to protection, since when calculating it obliges to take into account shares and votes, including those directly owned by persons interested in the transaction.

The purpose of the paper is to develop scientific and theoretical provisions on the challenging the related-party transactions by the corporation represented by a participant.

While writing the article, general scientific methods of cognition were applied (systemic, formal logical methods: induction and deduction, synthesis and analysis), as well as special legal methods (formal legal, legal modeling method, comparative legal method).

The article concludes that the current procedure for challenging related-party transactions, in terms of determining the person authorized to act on behalf and in the interests of the corporation, is similar to the procedure for challenging large transactions, which does not seem entirely correct. It is grounded that a corporation represented by its participant should have an opportunity to challenge a transaction in which there is an interest, if the corporation participant owns at least 1 % of the voting shares and votes of the participants minus the voting shares and votes of the participants belonging to the person interested in the transaction.