On The System Of Director's Duty Of Loyalty

Many countries in the Case Law System think of the legal relation between the company and directors as trust relation or agency relation, whereas some countries in the Civil Law System consider it as the commission relation. Though there is this difference, these countries commonly lay down that directors should perform the more duties when they master the more powers because of their positions. Furthermore, besides the duty of care, directors must perform the duty of loyalty, which ask that directors should be loyal to the company, and especially when the conflict of interests between individual and the company takes place, directors should take interest of the company as the most important choice, and shouldn't take advantage of their positions to gain illegal interest.Researching the relative cases, statutes and legal theories of some important countries, The thesis recognize that there are many different kinds of duty of loyalty, but the main three are as follows: non-self-dealing, non-competing and non-appropriating a company opportunity. In addition, with the development of the security market, takeover often takes place. When the target company is confronted with the threat to be tacked over, directors of the company will be in a dilemma. On the one hand, directors expect to make effort to keep their positions and other interests, on the other hand, they have to consider interests of the company and shareholders. On the horns of a dilemma, the duty of loyalty system which will be used to regulate directors' anti-takeover activities is beneficial to maintaining interests of the company and shareholders. Therefore, this thesis puts a premium on the main four kinds of duty of loyalty mentioned above, that is, non-self-dealing,non-competing, non-appropriating a company opportunity and the specific duty of directors during the company's being taked over.When violate the duty of loyalty, directors must bear legal liability. Because the system of duty of loyalty is an important legal norm in the civil law and the mercantile law, this article discusses only director's civil liability, not administrative sanction and penal sanction. As far as legal nature is concerned, directors undertake breach of contract liability. But sometimes directors not only break their duties, but also infringe the company's property right. So directors must bear the tortious liability at the same time. With regard to the kinds of civil liability, there are the main two: returning property, compensation for damages. In addition, the company can execute the intervening right to expropriate directors of their incomes from illegal activities. Lastly, it is another aspect of the duty of loyalty system for the company and shareholders how to take measures to prosecute directors who have violated the duty, so this thesis discusses this question as well.Although there are some provisions hi which the system of duty of loyalty is involved in China's Company Law, many flaws still exist. To make the duty of loyalty system most effectively, the thesis analyses the flaws in the lawmaking on this system in China and puts forward some ideas on how to improve it. The following are some practicable proposals: drawing up explicitly the nature of relation between the company and directors, laying down flexible procedure rules, adding some norms of duty of loyalty and perfecting director's civil liability.