Study On Director’s Fiduciary Duty Of Target Company In Corporate Takeover

Takeover has gradually grown to be an external way of company development and one way frequently taken by companies in different countries to control other companies is the share purchase. Tender offer has been primary approach taken by the buyer because transferring control of a company to a buyer successfully through other methods of takeover such as private negotiation and the open market buy up shall meet other requirements or cause other problems, for instance, share decentralization, long term of trading, high dealing costs with little tendency to succeed which may be resulted from great quantity of shareholders. Therefore, the term "company takeover" shall be considered as tender offer in this thesis. In the process of takeover, different kinds of relationships will be triggered between directors of Target Company and the buyer, Target Company and shareholder of Target Company and the attitude held by directors of the target company will greatly influence the ups and downs of the take-over and the interests of Target Company as well as its shareholders. Considering its vital position in the process of takeover of Target Company, legislators in common law system exert fiduciary duty in company law on directors to regulate its behaviors during takeover. In addition, as the practical administers of company, directors shall perform its duty automatically under the relative theory of modern company. In result, a subject worthy of deep study has been discovered as how to assure the directors of target company in the process of takeover, on the one hand, could perform its obligation as administers to protect its shareholder from being impaired by opportunism of buyer; on the other hand, shall act its power to protect the interests of the company and its shareholder by not making use of its principal position.The common law has established fiduciary duty to regulate behaviors of directors during takeover in Target Company. The thesis is primarily targeted on the relative provisions in common law system, starting with discussion on the exact orientation of directors during the process of takeover, and then deeply analyzing the specific fiduciary duties assumed by directors of the target company during take-over, including all the following contents such as the definition and content of fiduciary duty, the particular manifestations and judging standard of duty of care and duty of loyalty during take-over, the relationship between fiduciary duty and business judgment rule, and etc, in order to lessen the influence of opportunism caused by buyer on shareholder of target company through exerting fiduciary duty on director, as well as to prevent director itself, for the only sake of its own interests, from impairing the interests of the target company and its shareholder. The essay consists in4parts in total. Part1is firstly discussing directors’ role and its functions during take-over based on conflict of interest resulted from takeover as well as two typical decision-making modes during take-over, and then explaining the necessity of regulating its behaviors. In part2, firstly we simply analyze the basic content of fiduciary duty and its judgment criteria. And then is we shall discuss deeply the specific contents of fiduciary duties owned by directors of Target Company under different modes of decision-making, in order to make clear the specific fiduciary duty imposed upon directors by common law. In part3, we further try to sum up the standard of duty of care and duty of loyalty during take-over by studying on the related cases in common law, so as to discover some reference and guidance for directors of Chinese company to perform its fiduciary duty. And Part4is mainly studying on Chinese laws and regulations about directors’ fiduciary duty during take-over, through comparative analysis, pointing out the deficiency of current Chinese laws and regulations on directors’ fiduciary duty, and then providing concrete suggestions to improve relative provisions of Chinese laws and regulations by comparing the related systems between china and countries in common law systems.