The Concepts of «Reasonable Care» and «Standard Business Practice» in Corporate Law

Abstract

The article analyses legislation and law enforcement practice in the context of information obligations of the parties to a corporate agreement. It is argued that awareness of the existence of a corporate agreement is the only criterion for the potential application of such a way to protect the rights of the parties as void contract. Based on the study conducted, with a view to effective protection of the rights of shareholders (participants) who are not parties to such an agreement and the rights of the company itself, the author concludes that it is advisable to enshrine at the legislative level the legal consequences for the parties to a corporate agreement in case of their failure to fulfil the obligation to notify the company of the fact of existence of such an agreement without disclosing its contents. It is argued that the only person aware of the restrictions established by a corporate agreement should be the other party to such an agreement, and this is why such an agreement is mainly concluded to contain other tactical moves, other strategies, and other provisions which should be unknown to the general public. The author distinguishes the signs of reasonable care of a subject of legal relations, namely, diligent behaviour is behaviour (actions and omissions) in which 1) the subjects of legal relations, comparing external, objective, obvious and visible circumstances, may and should be aware of the presence/absence of certain factual circumstances/legal facts relevant in a particular situation; 2) subjects of legal relations should not ignore obviously dubious situations, and when they arise, they should take certain measures to prevent negative legal consequences for themselves. The author proves that the use of such an evaluative category as ‘reasonable care’ does not contribute to the implementation of the principle of legal certainty, predictability of judicial practice and stability of economic turnover, and such a position of national courts actually calls into question the presumption of conscientiousness of the party whose rights have been violated.