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ok, this is about fiduciary duty owed to minority shareholders by a controlling shareholder/faction. the common scenario is selling a controlling stake to a known looter and not investigating and all that shit.

i just did a corporations ca bar question (barbri CEWB corporation q4/ca bar summer 2008) there is a guy (carl) who owns 30% of common share of a corporation. he basically sells his 30% stake to a corporation that is wholly owned by a known looter.

anyway, i thought there wasn't much of an issue because 30% is not a controlling share. this is what barbri says. "[modern law] imposes a duty on a controlling shareholder to refrain from using her control to obtain a special advantage or to cause the corporation to take action that unfairly prejudices the minority shareholders. A controlling shareholder is now who owns a majority of stock. Although Carl's owning 30% of Motco's stock ordinarily would be insufficient to constitute a controlling interest, none of the remaining 199 shareholders own no more than 2 percent of Motco's stock. Therefore, Carl would be deemed a controlling shareholder."

there's no further explanation. it seems like the writer is saying there's an exception here. does anyone know what it is?

Yeah, just be on the look-out where it's one relatively significant shareholder when everyone else has chump change in the corporation. Or where it's one relatively significant shareholder who holds some special sway. Even though he doesn't have a formally controlling interest, you should still discuss the duties of "investigating and all that shit" in that situation. The question looks cribbed from Perlman v. Feldmann, which we learned in corporations in law school.

cool thanks for the confirmation. i couldn't find anything about it in their outlines either.