Theoretical And Empirical Analysis On Director’s Duty Of Diligence

The revised "Company Law of the People’s Republic of China" in 2005 referred to the concept of duty of diligence, but it’s still not clear what is duty of diligence, what is the theoretical basis of duty of diligence, what is the difference between duty of diligence and duty of loyalty, what is the content of duty of diligence, what is the doctrine of liability fixation, what kind of liabilities director shall take on the dispute, whether the content can be categorized, how to determine whether the directors have performed his/her obligation.The theorists started the research first and got fruitful academic achievements, but there are still no unanimous conclusions on above-mentioned questions until now. Taking the question “who are the subject of right” for an example, some theorists think it’s obvious that the company is the sole subject enjoying the right, as the director enters into the employment contract with the company, he/she shall be responsible for the company. If the director fails to perform his/her obligation, the company can demand compensation, and the director shall undertake the contract liability under the law. However, other theorists hold the opposite opinion, they think the subject of right can be company, shareholder, or even creditor of the company, the failure of the director to fulfill duty of diligence shall be subject to tort liability. As the augment continues, it seems to be an unanswered question.Similarly, lots of disputes appear after the enactment of Company law; it’s obvious that the courts follow the existing accountability system and hold different opinions on judgments, which includes, but not limited to the different judgment standards, such as the subjective judgment standard and the objective standard, the different nature of the liabilities, such as contract liability and tort liability, and different doctrine of liability fixations. Although the Company law didn’t introduce the business judgment rule, several courts have taken the rule into judgment, which is different from the essence of the rule as they only notice one or two factors and take it as exemptions.As the immaturity of law, the courts don’t have a unified standard and take wide discretionary when judging the due diligence disputes. As the defendant of the disputes, directors will benefit from lenient judgment standard and suffer from the strict standard. The strict standard will increase director’s vocational risk, affect the company’s stability and encourage the director taking conservative management measures, while the lenient standard will harm company’s interest directly. Besides, different judgment standards will lead unpredictability of the litigation and waste judicial resource.The dissertation is divided into three chapters, after combing the existing theory achievements and analyzing the judicial practices, I think the duty of diligence means the director should make full use of his/her own care, caution and skill and perform like the similar directors in the similar situation. The duty of diligence includes the obligation to follow the company law, the regulation and the article of association, the obligation to perform his/her duty actively and cautiously. The directors shall undertake the obligation to the company, the shareholders and even the creditor. When talking about the judgment standard, I think we should take the objective standard as the fundamental standard and consider director’s own knowledge, experience and skill.The duty of diligence is designed to balance the interest among the directors, company, shareholders and the related stakeholders, encourage the directors to use his/her skill maximizing the interest of the company, the shareholders and other subjects. But the Company Law and relevant judicial practice fail to achieve the goal, I think the Supreme Court shall publish the judicial interpretation and the bulletin cases, and definite the judgment standard, the content and subjects of the due diligence.