Theory Of Director’s Liability Limit And Exemption

With the sustainable development of economy, the corporations come alive, and corporate governance has become a continuously hot topic in the theoretical and academic field. The mode of corporate governance transforms from “the centralization of plenary session of shareholders” to “the centralization of board of directors”. The directors has replaced the shareholders as the actual controller and determine the future of the company. Therefore, the responsibilities of the directors have got great attention by the theorists. China’s “Company Law” and “Securities Law” have regulated the responsibilities of directors, which are strict director liability systems compared to those in United States, Japan, etc. The directors bear increasingly heavy responsibility in modern economic activities, some of which should be removed from the consideration of justice. Nevertheless, the provisions of limitation and exemption of directorial liability are very ambiguous and need to be refined and improved. With the increasing of cases related to directorial liability, the issues that whether the directors should take responsibility and how to take becomes the point of dispute. The increasingly heavy responsibility has obviously affected the decisions made by director in handling company affairs. Thus, to perfect the limitation and exemption of directorial liability plays an important role in the balance of governance mechanism and positive development of companies.In this paper, the provisions related to the limitation of directorial liability in other countries were analyzed from the view of basic theory, the current problems and solutions were discussed by combining the practical needs of China. This paper is divided into four parts. The first part introduces theoretical basis of the limitation and exemption of directorial liability, and expounds mainly in the aspects of legal basis 2 and economic basis. On the legal basis, the author states firstly the origin of the obligations and responsibilities of directors, then the relationship of obligation and responsibility is further analyzed by combining the relationship of the director and company, which provides legal foundation to the sections below. On the economic basis, starting with the essence of corporate contract, the author has analyzed the occupational risk of director integrated with the economic theory, finally the reason for limitation and exemption of directorial liability emerges.The second part discusses the theory of the limitation and exemption of directorial liability by the longitudinal and transverse comparison, the system situations in America and Japan have been analyzed from two aspects, legislative background and mode. The United States has experienced the financial crisis and the Smith V. Van Corkom case, which resulted in the increase of the director’s responsibility risk, as a consequence the states began to make the regulations about limitation of directorial liability. In Japan, the monopoly capitalists continued to expand as the development of corporations after the Meiji Reformation, the pressure of director obviously increased with the bringing in of the Shareholder’s Representative Action System. The limitation system of liability of German was imported to Japan, rigorous definition of the program qualifies was given, included in the resolution of the shareholders’ meeting, the agreement of supervisory board, the authorization of corporate charter and the special provision for independent director. By contrast the situations between China and other countries, big differences exist in the background, but the legislative demands are basically the same. Through the representation and evaluation about the systems of different countries, the author revealed the legislative demands of limitation of directorial liability.The third part investigates the practical demands of directorial liability under the background of corporate governance reformation in China. With the development of modern company, the importance of corporate governance has received more and more attention. Good governance to corporate influences not only the practical operation, but also the future development of the company. As the executives of the company’s business, the director plays key role in corporate governance. The development of modern corporate governance mainly includes the shareholders-standard and market-oriented governance mode, legal person controlled governance mode and bank-dominated governance mode. After deep discussion about the above three mode, the correlated relationship between director and corporate governance is studied. By combining the relevant cases, the demands of the directorial liability system are well investigated.The last part discusses the current problems concerned with the limitation and exemption of directorial liability, and analyzes the paths. According to the analysis of the theory, current situation and the case, fully comparisons with foreign systems are made, useful regulations are proposed. Connecting to the practical condition of China, the related problems and applicable solutions are presented, which are explored by means of four aspects about the limitation and exemption of directorial liability: the suitable subject, the approach of exemption, the condition of exemption and the regulation of amount of liability. Multifaceted matters containing the exact setting details and noticeable issues, and so on of every aspect are also been investigated.