Thinking Of Directors Of Non-competition Obligations

Separation of ownership and direct control of a company is a major feature of the modern corporate system. As a senior manager, the company's directors, in general are not the owner of the company (shareholders). But they know much about companies operating information and commercial secrets, and if they have engaged in the representation of companies competing business, the companies will lose their competitive edge, which will undermine the interests of companies and shareholders. To protect the legitimate rights and interests of companies and shareholders, company laws in most countries have provided directors' obligations of non-competition. Generally, directors' obligations of non-competition are as follows: First, directors may not be for personal gains in business with companies competitors; Second, directors should not make use of the company's business opportunities for their own . Compared with the provisions of company law of the developed countries, director's non-competition system in China is of many inadequate, mainly in the following aspects: 1.The subject scope of directors' obligations of non-competition is inconsistent. 2. The provisions about directors of state-owned exclusive investment companies are too strict and lack of the necessary flexibility 3.The provisions about business opportunities are too much simple. 4. The directors competing industry acts are defined unclearly. 5. The period of the director's obligation of non-competition is not clear. 6. The provisions about the right of reimbursement to the company are too simple. 7. The approval procedure of directors competing industry is not clear, 8. The provisions of director's liability for breach of the obligations are imperfect.On the basis of the theories and relevant foreign legislation cases about the directors' careful obligations, I put forward six fundamental principles for establishing a more perfect prohibition of business strife system in China: the principle of legal benefits equity, the principle of honesty and credibility, the principle of mitigating discrimination treatment, the principle of rights and obligations consistence, the principle of reasonable restrictions and actionable principles. At the same time, to perfect our system of director's careful obligations, I raise seven specific comments: 1.to unify subject scope of directors' obligation of...