The Study On The Directors’ Responsibilities To The Company Creditors

With the developing of modern companies, the scale of companies is sharply expandingand the shareholders are becoming more and more and the structure of equity is becominghighly dispersed. The shareholders’ role in company management is being marginalized,which promotes to reform the structure of corporate governance and gradually establish theboard of administration centered structure that meets the need of centralized and professionalmanagement in corporations. As the core of company governance structure, the board ofdirectors actually owns many management rights. However, the directors always abusemanagement rights and commit acts that violate the laws and the articles of association, whichharm the interests of investors, such as the company creditors. Such as Enron Bankruptcy,Sanlu Milk Powder Case, and so on, the cases sharply undermine the public confidence inmarket, which initiates the peoples to study how to perfect the company governance to orderdirectors to compensate the loss of company creditors.“The system of obligations and responsibilities is the last and relatively more effectivedefense which prevents directors to slack their duties, especially the damages system in thesystem of directors’ responsibilities, which can be known as the diamond of the crown ofcompany governance.” However, while legislators constructed the obligations andresponsibilities of directors in the traditional company law, they always stressed on thedirectors’ obligations and responsibilities to company and less focused on the legalrelationship between directors and shareholders, employers, company creditors and so on. Inmodern structure of company governance, the directors enjoy the management rights inreality and administrate the company properties and affect the prospect of the company. Thelegal status of directors has been changing. The directors’ status is the origin of duty of care.The changing status lead directors to the core of the right relationships concerning to company.The decision and management of directors would greatly affect the legal rights of companycreditors, which cause the relationship between directors and company creditors to change. Itrequires that directors should consider the interests of company creditors when performingtheir duties, if not, they would assume the damage responsibilities to creditors, which accords to the requirements of the system of company governance. Being the most authoritativegovernor in company, the directors should assume the last duties of the legality and rationalityof decision-making behavior to promote the directors’ rights consistent with the obligationsand responsibilities.The thesis goes back to the essence of legal entity and in the perspective of therationality of the function of company governance analyzes the flaws of the corporate bodytheory. With the revolution of company governance structure, the thesis proposes thatcompany law should formulate the directors’ duty of care and responsibilities to companycreditors. In the first part, the thesis comparatively studies the theories of essence of legalentity, emphasizes that when dealing with the exterior legal relationships of legal entity, thelegislators should confirm its independent status of civil subject and the role of thecorporations’ body, require that directors should comply with the fiduciary duties to companyand company should assume the vicarious liability for directors’ duty conducts.The second part deals with the flaws of particular theory of legal entity essence, requiresthat the legislators should adopt relatively rational theory when solving the specific law issues.In order to serve the purpose of the company governance revolution, the legislators shouldface up to the “hidden danger” in the corporation body theory in reality, which is moral hazardin the corporation vicarious liability. So the legislators should base on incomplete contractingtheory and corporation stakeholders theory to formulate that directors should consider theinterests of company creditors when performing duties and should assume the damageresponsibilities when disobey the duty of care so as to protect the legal rights of creditors.In the third part, the thesis deals with the specific directors’ responsibilities system. Thecompany law takes advantage of the responsibilities deterrence effect and curbs directorsimplementing opportunistic behavior through internal and external corporation supervisionmechanism in order to pursue directors’ responsibilities consistent with the system ofcompany governance. The company law should formulate that if directors disobey the duty ofcare, they should assume supplementary joint responsibilities to company creditors. The thesisanalyzes the real time and applicable conditions of director’s responsibilities to companycreditors. What is more, through studying the company governance practice at home andabroad, the thesis analyze the circumstance that directors should assume responsibilities andthe directors’ defenses, in order to promote to formally manage company and perfect the evolved company governance structure and improve economic development.