Theory Of Director Liability For The Company's Creditors

Directors’ liability to corporation creditors means that directorsshould take a personal liability to creditors’ loss if the delay or not fullsettlement of debts is caused by directors’ nonperformance of theirobligation of loyalty, diligence or their duty of care. Nowadays, mostcountries of the world have set directors’ liability for creditors’ loss duringthe company’s bankruptcy period. In the United States of America andAustralia, the faithful and diligent obligation and duty of care have evenbeen expanded to the whole life of the corporations, in order to protect thecreditors’ benefit as well as to discipline the directors’ behavior. In theProvisions of the Supreme People’s Court on Several Issues concerningthe Application of the Company Law of the People’s Republic of China（III）, which has come into force on February16,2011, director’sliability to the corporations creditors during the capital increase time hasbeen ruled for the first time. This regulations seems to be strict enough toprovide a sound legal protection for the creditors’ rights and a betterremedy method when their debts is infringed. If we make a further anddeep analysis of the corporate governance situation as well as the positionand authority of the board of directors in China, however, we can find thatthe abovementioned rules do not have sufficient reality and environmentbasis for their survival and effective operation, which caused a suspectradical action and an over-charged responsibility.This paper is composed by four parts（except the preface and theconclusion）, as the following author introduce it one by one briefly.Chapter first, make a detailed introduction of the directors’ liabilitysystem, including its origins, causes and its developments andbreakthroughs in modern and contemporary times. Chapter second, based on the real corporate governance conditions,combined with the most two typical corporate structures—the state-ownedenterprises and privately-founded companies （which are commonly ledby family-controlled companies）, author in this part investigated the trueposition and the authentic power and function of the board, came to theconclusion finally that directors in Chinese corporations stand in a weakand poor position, lack the necessary independence, and have actually fallrubber stamp.Chapter third, clarify the relative rules and provisions about directors’liabilities to creditors in the existing laws and regulations, figure out theirweakness and defects. Especially, writer in this chapter made a deepinterpretation and analysis about the article thirteen of the SupremePeople’s Court on Several Issues concerning the Application of theCompany Law of the People’s Republic of China （III）, and found seriesproblems and faults.Chapter four, essay theory with practice, on the basis of the realitiesthat confronted in China, the author pay attention to the improvement andapplying mechanism of the responsibility of the directors to the creditors,proposed some concrete advices and suggestions about the changes of theformer judicial interpretation, with the aim to rectify themisunderstandings we have fell into when dealing with the creditor’protection problem. At the same time, the thesis still point out the existingrules and regulations about creditors’ protection should be valued. Makeall of these laws and rules effectively performance is the ideal and optimalway to realize the creditor protection, as well as to show the original of thedirectors’ liability system.