On The Duties Of Company Directors To The Shareholders

The duties of directors is very important in the corporate governance. Chinese scholars have exhaustive research on the duties of directors to the company, but some problems are still pending for definite conclusion, such as the nature of the relationship, whether the directors have duties to shareholders, under what circumstances the directors have duties."The people’s Republic of China Company Law"(hereinafter referred to as the "company law") has rules about the shareholders having the right of litigation when the director infringes the interests of shareholders, but has no provisions of directors duty to shareholders. This paper, through the analysis of case law of Anglo American law system, analyzes the theoretical basis of the directors’duties to shareholders, the nature of such duties, and the situations when director owes duties to shareholders.This paper is divided into four chapters to analyze the above problems:The first chapter proposes opinion that the directors having duties to shareholders. There are three kinds of theories about the relationship between directors and the company:appointment, agent, trust. The following conclusions can be reached through the analysis of the three views above:first, the traditional point of "the directors have duty to the company", has theoretical support of every theories; second, there is relationship between directors and shareholders under the theory of "appointment". Therefore, based on the introduction of case law, the new opinion challenges the traditional opinion of "directors only have duties to the company".The second chapter demonstrates the basic theory of directors duties to shareholders. As to closely holded companies, majority shareholders and directors have fiduciary duties to minority shareholders; The public corporation, on the other hand, with shareholder center doctrine to the board of directors center doctrine, the rights of shareholders become less. This can be adapted by limiting the duty boundary of the directors, which gives more protection to the shareholders’rights. In addition, the opinion of "the overall interests of the company" expanded explanation:the interests of companies not only including corporate interests, but also including the interests of the shareholders; the company contract theory and transaction cost theory to reduce transaction costs, improve management efficiency, provide a theoretical basis for the opinion of directors’duties to shareholders.The third chapter analyses the nature of the duties of directors to shareholders:it’s the combination of legal duties and contractual duties, should be defined as "duty of good faith" rather than "fiduciary duty", and there are many differences between the fiduciary duty in company law and it in contract law. This chapter also introduces the differences between directors’duties to shareholders and the controlling shareholders’duties to small shareholders, and the differences between directors’duties to shareholders and directors’duties to company.The fourth chapter introduces the specific circumstances of directors’ duties to shareholders:first, when there is a direct relationship, directors have duties to shareholders. As in the process of acquisitions, the interests of company, board of directors, shareholders may vary, so there is a need to setforth the principle of duties that the directors owe to shareholders, and when the directors act over their authorities, not on behalf of the company, then there is a direct relationship between directors and shareholders. Second, when executing the affairs of the company, the directors have duties to shareholders upon special circumstances. Shareholders’subjective fault, only intent and gross negligence shall be deemed as the imputation princiles under these circumstances.