Research On Legal Application Of PRC’s Corporate Opportunity Doctrine

Corporate opportunity doctrine("COD"), which basically means that fiduciaries shall not usurp their company’s business opportunity through their position, is a sub-rule of the duty of loyalty under Common Law. With a view to allocating business opportunities fairly between the corporate and their fiduciaries, PRC has transplanted this doctrine into the Company Law of PRC in2005. However, the result of such transplantation is not satisfactory. And it is the object of this article to make efficient suggestions for improvement of COD’s legal operation in China.Chapter I is divided into3parts. Origin of the concept of corporate opportunity was set forth in the first part. Also the connotation of this concept was illustrated from three different aspects, which were the aspect of legal conduct, of legal subject and of the institutional object of COD. Analysis of the nature of corporate opportunity as a legal term could be found in the second part. And, in part3, jurisprudential foundation of COD is analyzed from the perspectives of fiduciary duty and agency cost.Chapter II is concerned with the history and changes of COD under the Case Law and the Common Law. Legal constituents of a corporate opportunity were examined under the judicial history of corporate opportunity disputes which took place in America and Britain. Reconstruction of COD proposed by American scholar, and the legislation innovation concerning the duty to avoid conflicts of interest within Company Act2006, both of which were constructive to improvement of the COD of China, were summarized in this chapter.In Chapter III, the current legislation regarding COD of China was sorted in the first place. Deficiencies of the current legislation was demonstrated through there approaches:in approach of fact confirmation, the current COD lacked efficient rules to identify its legal subjects or to distribute the burden of proof; in approach of regulation reference, the COD was mingled with the restriction of competing with company; in approach of legal effect, the law did not provide sufficient guidance for plaintiffs asking for remedies.For the deficiencies illustrated in Chapter III, a two-end structure respectively applied on public companies and private companies was proposed for the improvement of application of COD in China. For the operation of the aforesaid two-end structure within the company laws and registrations of PRC, the current system of legal types of companies was molded into a two-end model, in which listed-companies and unlisted-public-companies would be classified as public companies, and other companies would be classified as non-public companies. General rules applied to two types of companies, which focused on the constitutive elements of the doctrine, rules specifically applied to public companies and rules applied to the private ones, all of which were inspired by the theories and legislation summarized in Chapter Ⅱ, were sketched out in this chapter. Rules for public companies pose detailed regulations on the companies’ratification procedure for waiver of business opportunities, while the rules for non-public ones are more flexible for the companies’ waiver and allowing them to define of scope of their own corporate opportunities through their Articles of Association.