CORPORATE CONFLICTS INVOLVING OFFICERS OF BUSINESS COMPANIES

Abstract

The article analyzes that corporate conflicts in a corporate-type legal entity involving a director arise 
due to differences in visions of the company’s development strategy and management methods, non-payment 
of dividends, abuse of rights by officials, participants’ dissatisfaction with the financial results of the business 
entity, the level of transparency in management activities, the presence of ineffective managerial decisions, 
etc. Conflictogenic factors may also be perceived by the officials themselves, manifested in pressure on them 
and excessive interference in executive functions by the company’s participants.
It is determined that, according to the criterion of the subjects of a corporate conflict, conflicts between 
founders (shareholders, participants) and directors or top management are among the most common types 
of corporate conflicts. It is argued that the experience of European countries in holding directors liable in 
the form of disqualification should be implemented in national legislation by establishing that: 1) a person who, 
in accordance with the constituent documents or the law, acts on behalf of a legal entity, as well as a member 
of a collegial executive body of a legal entity, may be suspended (disqualified) for a certain period from 
performing their duties or permanently deprived of the right to hold the position of director by a court decision; 
2) if a person is suspended (disqualified for a certain period) or deprived of the right to hold the position 
of director due to causing damage to a specific legal entity, but is indicated as a director of another legal entity 
in documents submitted for state registration, the state registrar of legal entities, individual entrepreneurs, and 
public formations must refuse state registration, substantiating that such a person cannot be appointed as 
a head of a legal entity because the submitted documents contradict the requirements of Ukrainian law.
It is emphasized that there is uncertainty regarding the criteria for evaluating a director’s actions in a conflict 
between the director and a corporate-type legal entity, as well as between the director (when simultaneously 
a majority shareholder) and minority shareholders, particularly in the interpretation of the categories of good 
faith and reasonableness of the director’s actions. This leads to problems in law enforcement practice, 
including the lack of clear criteria for distinguishing between “acting in good faith” and “acting with permissible 
entrepreneurial risk” (the business judgment rule).
It is concluded that a solution to this problem may be to enshrine in legislation a provision that 
a director’s actions shall not be considered in bad faith if, when making decisions, the director reasonably 
believed they were acting on the basis of sufficient and adequate information in the best interests 
of the company. The criterion for distinguishing between good-faith and bad-faith actions of a director should 
be solely the presence of fault in the form of intent or the conscious disregard by the official of their duties.