The Nyrstar Case: A Textbook Principal-Agent Problem

The classic 'principal-agent problem' played a central role in the Nyrstar case. Kris Vansanten describes how board members and legal advisors, instead of defending the company's interests, acted in favour of Trafigura - the reference shareholder. The result was a restructuring that left other stakeholders empty-handed.

Kris Vansanten explaining the Principal Agent Concept

A classic example of the principal-agent problem is the role of ambassadors, who represent their country’s interests abroad.

As long as the ambassador faithfully executes the home country's strategy, there’s no issue. But when personal interests begin to influence their actions — such as preserving local relationships, enhancing their own reputation, or favouring personal connections — a conflict can arise between the ambassador as an individual and as a representative of their country. That’s why many governments choose to rotate or recall ambassadors after a few years of service.

The Nyrstar case illustrates how conflicts of interest within corporate governance can undermine a company’s legal and fiduciary duties. As a minority reference shareholder, Trafigura gained significant influence over board appointments without triggering a mandatory public offer. This control enabled transactions that favored the shareholder’s interests over those of the company and its broader stakeholder base—ultimately leading to a restructuring that left little to no value for other stakeholders.

Principal-agent failure in practice: the Nyrstar case.

The principal-agent problem highlights a key risk in corporate governance: those who act on behalf of a company — such as board members or executives — are expected to serve the company’s interests, but may instead pursue their own agenda. This is precisely where external service providers come in. Lawyers, as well as banks and experts, are often appointed by these individuals. However, they carry a legal responsibility not to follow instructions that go against the interests of the company itself. They are not merely service providers to individuals — they are bound to act in the interest of the company as a whole.

In total, 80 million euros were spent on the preparation and implementation of the restructuring. And an additional 20 million euros was provided by Trafigura to the company to defend this restructuring.

Lawyers carry a legal responsibility.

The Nyrstar case reveals how not only board members, but also company lawyers, can become aligned with the interests of a dominant shareholder. Instead of safeguarding the company’s broader interests, both governance and legal counsel shifted their loyalty—raising fundamental concerns about internal accountability and corporate integrity.