The Analysies Of Director’s Duty Under The Company Capital System

Director responsibility is the core of corporate governance, and this article will discuss the bearing of the director responsibility from the perspective of corporate capital system. The director responsibility that director shall bear in such system usually includes the stage of formation of capital, the stage of capital maintenance,and the stage of capital exit. In fact, the director liability provisions in China’s company law are so simple that there is much uncertainties on the responsibility of relevant issues. So it’s necessary to improve the director responsibility system,especially when the company’s legal capital system gradually develops toward the direction to relax capital regulation. The main idea in this article is that with the reform of company capital system, the corresponding director responsibility system should be built up gradually, and the director responsibility Is established in accord with authority, instead of imposing responsibility for no reason.Around the director responsibility of company capital system, this paper is divided into five parts for reasoning, including the first chapter to fourth chapter and the conclusion part.Chapter 1: Theoretically analyze the bases of director responsibility under capital system: First, capital is the blood of the company, and the director is a gate keepers of the company’s assets. The company as an artificial legal person, all its property shall be in charged of the company’s real managers that is the directors, which is bothpower and responsibility; Second, with the development of the corporate governance center migrate toward the board, and the establishment of clear director responsibility system, it’s necessary to make a reasonable response to the timely adjustment of the rights and obligations of directors and the scope of responsibilities. Third, The revised company law in 2013 has further eased the regulatory system of the authorized capital of the company, which may easily lead to problems of capital adequacy in random subscribed registered capital companies. However, in the current legislation, only the "Law interpretation of the three" has roughly regulate that director’s should bear the responsibility for those shareholders who are flawed in the performance of the new capital subscribed in the process of capital increase, which exists some ambiguity problems; In the meantime, the regulation on directors responsibility in the company’s capital system, profit distribution system and reinvestment system is almost in blank,there is no regulation on such directors’ actions; Moreover, there is also no legal provisions on directors’ responsibilities when the company is on the verge of bankruptcy according to the company law.Chapter 2: Directors belongs to the professional management personnel, who directly involved in the company’s decision-making and execution, and have the knowledge of the company’s operating cash flow. So directors should perform their supervisory responsibilities about whether shareholders paid in time or not on the bases of their mastery of the relevant information, audit capital contribution and remind to pay. They are more suitable than shareholders. As for the investment of shareholders, as to who will supervise the shareholders subscribed capital in place in time, this article’s view is that directors are on behalf of the company to receive the assets, so they should perform their duty of care to shareholders’ payment. From the nature, such duty is an obligation to shareholders, the company and the creditors, and it is a legal obligation and obligations agreed upon. In addition, the Article 13 in "Law interpretation of the three" only regulate that those shareholders who are flawed in the process of "capital" shall bear the liability, and directors and senior management should assume corresponding responsibility. according to the rules, there are problems as follows: First, it merely provides that directors need to take responsibility during "capital increases". But whether will directors take responsibility for shareholders’ flawed payment during "capital contribution" ? There is not described in "Law interpretation of the three"; Second, what’s the nature of "appropriate responsibility" regulated in "Law interpretation of the three" ? Are jointly liability or supplementary liability? As for these questions above, this paper argues that directors also should respond to shareholder capital contribution defects in the process of "capital contribution", and the responsibility nature should be regarded as a supplementary liability.Chapter 3: Companies’ capital maintenance is always throughout their operation,and directors actual are in control of companies’ business operations. As the gatekeeper of the company’s assets, directors have the obligation to maintain the responsibility of the company’s capital. This article mainly discusses from three questions including the capital maintenance, capital reduction profit distribution, and the action of the company reinvestment: First, there is no breakdown of the provisions for capital reduction, the viewpoint of this paper is that rights could be left to directors as for form capital reduction, and make the responsibility regulation as a supplement so that to let capital reduction behavior play a great role in corporate governance in great degree. Second, the current situation is that directors actually master the right to decide the distribution of profits, but without the corresponding liability, and there is no legal regulation about directors’ misallocation. This article’s view is that directors should bear additional liability. Third, given that the company’s reinvestment is permitted by legislation, it also has practical reasons for its existence, and under the condition that the law has allowed company’s discretion, the view of this paper is that directors could be response for the decision making and they shall bear corresponding responsibility.Chapter 4: This chapter mainly discusses director liability issues on the verge of bankruptcy, starting from the object of responsibility, referring to the responsibility of executives of directors under the insolvency law. Firstly, this paper points out the definition of the state on the verge of bankruptcy, analyze the right subject of legal responsibility from the delegate theory and Residual claim theory. Then, discusses thedirector responsibility on the supervision of shareholders "contribution" and filing for bankruptcy.This paper mainly points out that with the weakening of legal capital system, it is imperative to strengthen the company’s internal control, and a good corporate governance model should consider how to settle the conflict of the interests of all parties. When the modern corporate governance model transfers to the centrism of board. The establishment of duties regulation of directors should be accompanied by changes of their powers. Under such capital system, the director responsibility system will play a greater role in making maximum benefit.