A Research On The Duty Of Non- Competition For Company Directors

The board is the key to run a company, while as a member of the board, the director possesses the decision-making power of the company’ major issues. The director’s violation of the non-competition obligations may damage the company’s interests. Company Law issued in 1993 sets the non-competition obligations for directors to prevent them from abusing their rights in order to protect the company’s legitimate rights. In 2005, the original absolute non-competition obligations were revised to relative ones and have been implemented since then. Though thorough interpretation and analysis has been made and a lot of legislative proposals have been provided, little concern has been shown towards the practical operation of the non-competition obligations. Based on the relationship between directors and the company, and with comparative analysis and empirical study, this paper analyzes the foundation, describes the subject as well as exemption mechanisms of non-competition obligations and provides remedies in case of directors’ violation.This paper is divided into four parts:The first part is an introduction to the director’s non-competition obligations. Based on the main points of the academia, it first discusses the concept and classification of non-competition obligations. Then with a statistic analysis of practical cases, it differentiates non-competition obligations from corporate opportunity prohibition obligations. By analyzing the relationship between the director and the company, the foundation of directors’ non-competition obligations is made clear. At last, the value of directors’ non-competition obligation is elaborated from the perspective of economics and law.The second part is about the elements of directors’ non-competition obligations. Firstly, it analyzes the types of directors and defines who to take responsibilities for the non-competition obligations. Then, it analyzes the participants, the scope of time and field of the non-competition obligations. Suggestions are also provided to improve the defects of present system.The third part is to study the exemption mechanism of directors’ non-competition obligations. Firstly, it analyzes the significance of partial exemption from non-competition obligations. Then some specific recommendations are provided to improve the process of "disclosure" and "license".The last part is about legal responsibility for directors who violate non-competition obligations. Civil liability of directors is focused on from both external and internal aspects in this part. Subsequently, it presents and analyzes several ways for the company’s accountability and puts forward recommendations for the deficiency of the legislation.