A Study On The Regulation Of Directors' Self-dealings In Limited Liability Companies

With the development of the world economy and the expansion of enterprises,the corporate ownership has been separated from management.The equity decentralization has also become increasingly significant.Hence,in order to ensure that the directors,supervisors and senior officers can fully perform their obligations and to prevent the impairment of corporation interests,company laws in different countries have provided various terms for company governance.On the other hand,as to the director self-dealing,if a sound system,suiting the market economy demand and conforming to the laws,can be designed,then it will benefit not only the companies but also the whole market.Therefore,a new perspective for improving company governance by the legislature of our country lies in distinguishing and regulating the director self-dealing that harms the market economy.In Chinese market,limited liability companies has a distinctive feature of human resource and capital integrity.Most existing studies have tried to regulate the director self-dealing from the angle of statute law and neglected the vital role played by the articles of association.Besides,current legal research has mainly focused on listed companies rather than the regulation of the director self-dealing.Thus,there is great potential for researchers to carry out studies in this field.This thesis consists of four parts:The first part presents an overview of the director self-dealing.It starts with defining the self-dealing of the director,and then discusses the particularities of this legal issue with consideration of human resource integrity in limited liability companies.It also analyses the positive and negative effects brought by the director self-dealing transactions as the market economy constantly deepens.The second part demonstrates the theoretical basis for the regulation of the director self-dealing.This part uses some notions from economics,including corporate control,corporate governance and agency cost,etc.,to examine the legal logic of this issue.Seen from the economics of law,the articles of association is a kind of incomplete contracts.Relevant theories in this field have an important value in finding the nature of company law and making strategies for company governance.The third part studies the current regulation of the director self-dealing in China.Firstly,there are legitimate and illegitimate director self-dealing transactions and it is important to provide explicit procedural rules,based on which the validity of these transactions can be determined.Secondly,along with the writer's own internship experiences in a law firm,the present legislation for director self-dealing is introduced in this part.The writer analyses the condition of director self-dealing in judicial practice and points out the flaws of the related system in China.The fourth part offers some suggestions for the regulation of director self-dealing in companies with limited liabilities.The writer proposes to enhance the system through establishing information disclosure system,improving approval procedures and advancing judicial remedies.To begin with,Chinese Company Law does not specify the mandatory disclosure obligations of shareholders who have a stake in the company.The insufficient information shared among shareholders may easily lead to the infringement on the interests of the minority shareholders.Next,the board of directors should be the main decision-making body of the director self-dealing and the articles of association should exert its function as well.Lastly,the writer talks about the judicial remedy mechanism and approach,including the shareholder's exercise of his cancellation right and shareholder representative actions,followed by the discussion of the limits on director self-dealing transactions.