| The basic features of modern corporate is the separation of ownership and management, the direct negative result is the corporate managers who is represented by directors do harm to the interests of the company and shareholders by abusing the powers. The conflict of interests in transaction is already become the primary means for directors to do harm to corporate and shareholders, also take profits for themselves, while the improper self-dealing is an usual way which results in the conflict of interests in transaction. In this case, legal regulation of director self-dealing has become the task that the Company Law must complete. This paper consists of three parts to discuss the legal regulation of the self-dealing.The first part describes how to define director self-dealing. when the director self-dealing is defined, the presupposition is to make clear the scope and the conditions which we applied in the regulation of the self-dealing. At first, this part analyses the meaning of the director self-dealing, including the definition of self-dealing, "What is trade", the features and the relation between self-dealing and related transactions. Director self-dealing means the transactions between the director or related person and the company which the director is serving in. The transaction is divided into direct contractual trade and other transactions which indirectly led to the transfer of interests of the director's company, by analyzing the existing legal norms. The feature of self-dealing is a "double-edged sword," with conflict of interests and unfair risk. Secondly, this part discussed the form of self-dealing, mainly by comparing the legislation of many countries all of the world, then summarized the scope of related person in indirect self-dealing according to two standards——immediate relatives and economic interests. Finally, the limitation of time on self-dealing is designated to the duration directors serving in the company and a period of time before or after this. Since some directors indirectly lead to the self-dealing recessive by making use of the power of control in reality, It's a better way to protect the interests of corporate and shareholders, through extend the time from the tenure to prior to or after this.The second part analyzes the national legislation through a detailed analysis of the basic mechanism of director self-dealing, or the procedural rules of self-dealing regulations, substantive rules and legal remedies. First of all, self-dealing system include disclosure the obligations of directors and the ratification process. First, by analyzing the United States, Britain, France, Japan and South Korea's law, we discuss the contents of the disclosure, disclosure time, disclosure method and the legal consequences of failure to fulfill disclosure obligations. Disclosure content focus principally on two aspects: Firstly, it requires directors to disclose self-dealing interests, linkages, and some important trade-related things; secondly, the transactions between the directors and the company extend certain sums, the directors must disclose it, even disclose to the company's shareholders at the meeting. Company directors should disclose this when conflict of interests appears, and they should disclose this before company's board of directors or shareholders make the resolution. Disclose the information in writing. If directors don't perform the self-disclosure obligations, it may cause the transaction invalid or revocable. Second, who has the right to ratify the process were discussed. There are four main ratification systems in all countries. But the common practice is that the board of directors approves transactions in normal daily operations, and the shareholders approve in the exceptional circumstances. One shareholder transactions between directors and the company should be the identity of directors, which is more conducive to the interests of the company and shareholders. Absorbing the rules of the related person without voting rights is necessary, most countries stand firmly with this rule in the transactions between directors and the company, except the British. This rule is likely to result in the quorum of the non-interested person inadequate, in that case, the validity of the voting differs in the world. Approval authorities should normally make the resolution before the transaction, but the approval process can not determine the validity of the given transaction. Second, the substantive rules of self-dealing mainly refers to the fairness of the court's reviewing of transactions, that is what criteria the court will take to determine a transaction's validity. According to the U.S.A cases, the judge in determining whether a self-dealing is just will consider the following factors: whether the company received full value when purchasing the goods ; a particular property is necessary for the company; the company's financing capacity; whether the transactions is accordance to market price or below market prices; whether the transaction eventually make the company suffer loss and so on. In practice, we roughly take two ways to judge the fairness of a self-dealing: the justice process and fair price. Finally, this part describes legal remedies in self-dealing system, it mainly include revocation of self-dealing by the shareholders derivative action. The third part is the improvement of self-dealing system. First, it describes the situations of self-dealing in our country, including three direct main legal norms and six indirect legal norms. Secondly, we discuss the defects of self-dealing in our country, as follows: the determination of self-dealing's effect is merely authorized summarily to corporate charter and regard shareholders'meeting as the only approval authority; the scope of voting system's applying is too narrow; and the related directors` scope is also too narrow. Finally, give some legislative proposals to our system of director self-dealing. On one hand, we should improve the procedural rules of our self-dealing system, including disclosure procedures and approval process. The content of the disclosure obligation conclude manner, time, and several other aspects. According to China's actual situation, approval process should be shareholders approved models in a limited liability company, the dual approved system in the joint stock company, except in special circumstances. It also provides interested directors voting rule, so that to safeguard the interests of the company to prevent the occurrence of improper transactions; on the other hand, make the directors of self-perfecting system more perfect .It also apply to substantive rules of our system .To establish the ultimate fair value of the self-dealing system and give the power to the court to review the justice of the system and make the legal system of director self-dealing perfect. |
