To whom does the owner of 100% of the shares of a company owe a fiduciary duty to?

Question

According to this youtube video by Patrick Boyle Patrick Boyle there is a lawsuit going on about a simpsons like bankruptcy. The allegation, as I understand it, is that Thai Foods, the 100% owner of Red Lobster, exerted "undue influence" such that Red Lobster offered an "all the shrimp you can eat" deal which was financially ruinous for Red Lobster and somewhat profitable for Thai Foods as they supplied the shrimp. The implication being that Red Lobster was failing anyway, and it was slightly better for the parent company for it to fail like this than for it too happen slower.

If the allegations and the corresponding implication was true, what would be wrong with this action? In whose interest are the 100% owners of a private company required to act if not their own?

Answer 1

Mere owners owe no duties. But mere owners do not control a corporation; directors do. Directors owe a fiduciary duty to the corporation.

Failure to act consistent with that fiduciary duty can have negative effects on others, including shareholders and creditors.

There is something called a "derivative action" whereby someone (often a minority shareholder, and sometimes a creditor) can bring a claim on behalf of the corporation against a director who failed to act consistent with their fiduciary duty.

A receiver in bankruptcy can also make claims of this sort on behalf of a corporation.

See generally: https://www.stradley.com/insights/publications/2020/08/finance-alert-august-7-2020

(As an aside, I do not believe you have described the ownership structure accurately, so your example of Red Lobster may not actually be an illustration of the concept you are asking about.)

Answer 2

Shareholders owe no duty, officers do

australia

The officers of a company are the directors, the company secretary, and anyone who controls the corporation, whether officially appointed to do so or not.

In your example, Thai Foods exercised control over Red Lobster - that makes them an officer.