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51 U. Louisville L. Rev. 535 (2013)
Shareholders Are Not Fiduciaries: A Positive and Normative Analysis of Kentucky Law
Thomas E. Rutledge*
Abstract

This Article considers a seemingly simple question—is the statement “shareholders in a Kentucky business corporation stand in a fiduciary relationship with one another” an accurate statement of the law? In fact, it is not. As is detailed herein, as a matter of positive law, (i) no Kentucky court has held there to be a fiduciary relationship among shareholders save in one narrow fact situation, and that decision may now be invalid consequent to intervening developments in the controlling statute, and (ii) the absence of a statutory inter-shareholder duty in the Business Corporation Act, when compared to the presence of inter-owner fiduciary duties in Kentucky’s other business organization statutes, must evidence the absence of such obligations. Turning to a normative analysis, the absence of inter-shareholder fiduciary obligations is correct as: (i) the intershareholder relationship lacks the features of a fiduciary relationship; (ii) the imposition of fiduciary duties among shareholders would violate the statutory construct of majority control of the corporate enterprise; (iii) the existence of such duties would do violence to a consistent form in which, by statute, fiduciary obligations are imposed upon only those charged with the day-to-day management of the venture; and (iv) there are a variety of
alternative structures in which, if desired, inter-owner fiduciary duties do exist. This Article concludes with a review of how perceived cases of oppression may be addressed through contractual (as contrasted with fiduciary) remedies.

* Thomas E. Rutledge is a member of Stoll Keenon Ogden PLLC resident in the Louisville office. A frequent speaker and writer on business organization law, he has published in numerous journals, including The Business Lawyer, The Delaware Journal of Corporate Law, the American Business Law Journal, and the Journal of Taxation. Mr. Rutledge is an elected member of the American Law Institute.