Study On Exclusion The Director’s Liability By Autonomy Of Will

While the ownership and the power of operation are widespread in the company management, and the change of General Meeting Centralized Doctrine to Directors Board Centralized Doctrine, directors become powerful than ever and they play a big role in corporate administration. Sometimes the directors’ s behavior is ever related with the fate of a company. So Company Law of almost every country strengthens directors’ liability to protect the interests of corporation, shareholds and creditors. But if we are too strict with directors in corporate governance, it will harm the balance between director’s right and duty and increase director’s extra worries. Also it will discourage the directors’ adventure and innovation spirits and infringe directors’ profession. A good kind of corporation governace should both emphasize personal liability of the director and strengthen protection of the director’s interests. So the relief of director’s liability is needed. The relief of director’s liability have more perfect system design in many country, including Business Judgement Rules, Exclusion the Director’s Liability by Autonomy of Will and Director’s Lliability Insurance and so on. But our coutry’s relief of director’s liability is lack. Firstly we do not have Business Judgement Rules. Secondly our Company Law only stipulate exemption the liabilities of director whose object the resolution. Thirdly director’s liability insurance has not been developed in large areas. So our directors in corporation management still face huge risk.The reasonable director responsibility system should not only encourge the directors to work but also suppress directors’ violation. The theory is significance to improve our coutry’s director responsibility system. We need learn to strengthen the director responsibility and reduce the responsibility simultaneously. Director liability exclusion is not intended to allow directors shall not be liable in the company management process, but to ensure that directors perform their duties more efficiently. Any form of avioding director liability is not arbitrary, it should be strictly adherence to the specific principle in the scope and procedure aspect. Compared with avioding the director’s liability by legal, avioding the director’s liability by autonomy of will is more simple and effective. The means of exclusion the director’s liability by autonomy of will include through the company’s Article of Association, Regulation of Shareholders’ Meeting and Regulation of Board of Directors. It bases on that company organization have the right to reduce the risk of derectors in the management process. Due to the system of exclusion the director’s liability by autonomy of will, directors may have more protection legal. The system can not only balance the relationship between risk and income, but also make the directors have more enthusiasm for work and create more wealth for company.This article altogether divides into four parts. The first part introduces the theoretical basis of exclusion the director’s liability by autonomy of will. Legal duty produce legal liability. But the advanced director system should balance the legal duty and legal right. The exclusion the director’s liability by autonomy of will is mainly because the company as an independent market economy subject has the right to reduce the risk faced by directors in the management process.The second part introduces the scope of exclusion the director’s liability by autonomy of will. The exclusion the director’s liability by autonomy of will mainly refer to the director’s behavior which violate duty of care. Because the director often make business decisions under the circumstances of incomplete information and little time. Even though the judgement made by directors is correct, no one can guarantee the last result is good because of the complexity and variability in the business society. As long as the directors perform their duty of care properly and follow the corresponding procedure, their behavior should be protected. The director’s behavior which violate duty of loyalty and the director’s liability for the third party should not be restrained or discharged. This is because when directors breach the duty of loyalty, the directors are identified as purpose. When the directors do not fulfill the duty of loyalty, they are generally preferred by seeking their personal interests. If the directors’ s duty of loyalty can be exempted, the company may suffer huge losses. As for whether except the directors’ responsibility for the other person should be decided by the other person not the company.The third part introduces the application of exclusion the director’s liability by autonomy of will. The premise of the exemption of the directors’ liability is the director’s behavior which violate duty of care. We can consider both the objective and subjective factors to judge whether the directors perform duty of care. As long as directors make business decisions which base on good faith and reasonable investigation, company can consider to discharge directors’ liability. Even though the dicisions is wrong, unfortunate, even disastrous at last. In fact, both the legislation and the academics is hard to judge whether directors perform duty of care. We need to continuely develop the method of judging directors’ s performance duty of care both in theory and practice. When the directors violate the duty of care, the company can decide to exempt the duty of directors as long as the directors are not intentional and do not infringe the interests of the creditors. System of exclusion the director’s liability by autonomy of will should set the minimum liability amount. Company can decide whether to aviod liability when directors’ s liability is above the minimum liability amount. When directors’ s liability is below the minimum liability amount. Directors should pay the compensation on their own.The fourth part introduces the main ways of exclusion the director’s liability by autonomy of will. Because of the feature of company’s article of association, sharehold’s meeting and board of directors, the implementation of exclusion the director’s liability by autonomy of will is mainly through company’s article of association, sharehold’s meeting and board of directors. Company’s article of association is the result of corporate autonomy governance. Company’s shareholds will be able to create their own rights and obligations, including the abandonment of their rights. So company’s article of association has the nature of contract. Avoiding the director’s liability through company’s article of association is the company’s unilateral legal act and is legally binding. This system fully reflects the spirit of company autonomy and contract, and also encourage the directors to fulfill their duties more actively. In our corporate governance, the company is funded by the shareholders, the shareholders will always be in the company’s core position. According to Chinese Company Law, the members of the board of directors will be generated by the shareholders and will be responsible to the shareholders. So the sharehold’s meeting is appropriate company organization to avoid directors’ liability. The interests of shareholders are also considered core interests of the company. Avoiding the directors’ liability by the board of directors is more efficient, convenient and in line with the efficiency of the business community, particularly with the development of the market economy. Compared with shareholders, the members of board of directors are more professionals in Finance, Accounting, Legal and so on. Avoiding the directors’ liability by the board of directors can be more scientific and reasonable.