Friday, March 25, 2016

Shareholders Are Not Fiduciaries

Shareholders Are Not Fiduciaries

In a decision rendered earlier this week, Griffin v. Jones, Civ. Act. No. 5:12-CV-00163-TBR, 2016 WL 109287 (W.D. Ky. March 21, 2016), the court found that the shareholders of a Kentucky corporation are not as to one another fiduciaries.  Therein the court wrote:

In Kentucky, a stockholder does not owe a fiduciary duty. Compare KRS § 271B.7 with KRS § 271B.8-300 and KRS § 271B.8-420. Other states have held that a stockholder may owe a fiduciary duty in the special case of closely-held corporations. See e.g. Crosby v. Beam, 548 N.E.2d 217, 220 (1989) (explaining circumstances in which a stockholder can owe a fiduciary duty to another stockholder under Ohio law). Kentucky has not adopted this rule. Estep v. Werner, 780 S.W.2d 604 (Ky. 1989); Thomas E. Rutledge, Shareholders Are Not Fiduciaries: A Positive and Normative Analysis of Kentucky Law, 51 U. Louisville L. Rev. 535, 535 (2013) (explaining the history of cases and legislation on this issue and advocating that Kentucky not adopt such a rule).

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