Controlled companies: What directors should know

Being a director of a controlled company can be a unique governance experience. Companies can benefit from having a controlling shareholder. It can be a stabilizing influence, making the company relatively immune, for example, to the pressures of transient, short-term investors. However, a high level of shareholder control is not without risk and these risks can be alleviated by sound corporate governance.

Controlled Companies Briefing: Questions for Directors to Ask examines the role and responsibilities of a board member in this type of organization. It highlights how the board’s typical roles can be different in a controlled company.

Topics discussed include:

• What is the nature and degree of control exercised by the controlling shareholder?
• Will you be confident enough to use independent judgement and challenge the controlling shareholder as needed?
• Do you understand how dual share class structures work?
• What “coattail” provisions are in place to protect minority shareholders?
• How are your duties and responsibilities as a director different in a controlled company?
• Under what circumstances should you resign from a controlled company?