On The Director's Duty Of Care

With the ownership and the right of management separation,above situation results in expanding the board of directors and directors'power. As the expanding of board of directors'power , the corresponding duties and liabilities must be strengthened in order to prevent the company and shareholders'legal benefits from being spoiled by their misuse of authority. Legislations in many countries have made detailed and operational requirements to directors'duties and liabilities, otherwise, company legislation in our country on this issue exists more defects. Article 148 of the Company Law of the People's Republic of China stipulated directors, supervisors, senior—managements'diligence obligation (also called duty of care),but the behavior standards of duty of care, constitutive requirements, legal responsibilities and the exemptions of breaching the duty were not made detailed provisions. All above make the regulation not operational.Thus, in order to change the blank situation of director's duty of care provisions in our Company Law, with reference to the relevant countries and regions'the director's duty of care system, some suggestions have been provided to perfect the director's duty of care system in our Company Law.The first part of this article is the definition of the director's duty of care. First of all, clear the meaning of the director's duty of care. Article 148 of the Company Law of the People's Republic of China:"A director, supervisor, or the general manager shall abide by laws, administrative regulations and articles of association of the company and shall have the fiduciary and diligent duties to the company."Diligence obligation in the article is called duty of care. Regardless of how the title, the author thinks, connotation of duty of care is the same. Namely, a common director in similar circumstances should show due diligence, prudence and skill when he carries out its duty. Secondly, by the analysis of the two obligations (duty of care and duty of loyalty) and clarifying the relationship between the duty of care and the duty of loyalty, conclude to set up two independent systems of the duty of care and the duty of loyalty. Thirdly, answer the problem—"How does the Duty of Care come from?"from the jurisprudence angle. Introduce the three mainstream theories: the trust relationship, the agent relationship, and the appointed relationship to explore the relationship between the director and the company. The conclusions are: the relationship between the director and the company should be the appointed relationship, from which clarify"How does the Duty of Care come from?"Finally, researching on the content of director's duty of care. There is no specific provision to the content of director's duty of care in our Company Law. In reference to the relevant provisions of common law system, and through summing up the cases, the content of director's duty of care is divided into: diligent obligation and prudent obligation.The second part is the research on the judgment standard of director's duty of care. First of all, separately introduce the judgment standard of director's duty of care in the United Kingdom, the United States, Germany and Japan. Secondly, Summarize and comment the judgment standard of director's duty of care through an analysis of the above. Summarize as follows: subjective standard, objective standard and the standard of correspondence between subjectivity and objectivity. At the same time, the advantages and disadvantages of different standards are commented. Finally, the author putted forward my own opinion to the situation of the lack of the judgment standard of director's duty of care. The author thinks that our Company Law should take"the modified standard of correspondence between subjectivity and objectivity". That is, in principle, take an objective standard. To the excellent director, subjective standard can be applied but it must be strictly applied. Only for those in some fields with special expertise, the subjective standard can be applied when they deal with the relative affairs (such as qualification of CPA).The third part is the research on the responsibilities of breaching director's duty of care. The responsibility described in this article refers to the director should bear unfavorable legal consequence for breaching director's duty of care. And its disadvantage originates from directors'duty of care. When director fails to perform the duty of care without appropriate exemptions, the directors must bear the responsibility of law. In this regard, civil law and common law countries have provided clear regulations. From the company legislations of many countries, the civil liability of breaching duty of care includes two kinds: The first kind, director's duty to the company; the second, director's duty to the third party. Focus on the issues of the nature and elements of bearing civil liability to the company or the third party for breaching director's duty of care.The fourth part is the research on the exemption of breaching director's duty of care (Business Judgment Rules). First of all,"Business Judgment Rules"are summarized."Business Judgment Rules"as the American creating company's legal system is the protection system that is provided to the director by the court. Currently there are two styles: one is the style of Delaware, The second is the Legal Research Institute. Secondly, point out applicable conditions of"Business Judgment Rules". Include the following three aspects: 1. "Good faith" or no concern with the decision object; 2 Achieve the rational knowledge to the decision object; 3.Reasonably consider the decision-making in line with the company's best interests. Finally, though"Business Judgment Rules"hasn't universally become applicable enacted law system, scientific thinking behind the rule has been accepted by all countries in the world. Therefore, China's Company Law should also use for reference to"Business Judgment Rules". Analyze the necessity of reference to"Business Judgment Rules"and the problem of form when the system is introduced. By analyzing and comparing, propose the ideas that articles of association and judicial interpretations should build"Business Judgment Rules".