On Director's Duty Of Diligence

Directors' Duty of Care is known as “Duty of Diligence” or “Duty of Good Faith”.In Civil Law System,based on the theory of entrusted contracts,it is generally considered that directors do have the adequate care to the company,which is referred to as “Duty of Care” or “Duty of Good Faith”.However,“Duty of Diligence” comes from Common Law System,whose members believe that directors have fiduciary obligations to the company.The fiduciary obligations includes two aspects,which are Duty of Diligence and Duty of Loyalty.Although Common Law System is different from Civil Law System in legal languages about Directors' Duty of Care,there is no substantial difference in substantive contents between Common Law System and Civil Law System.They both emphasize that directors should be conscientious,careful and diligent at work with the aim of maximizing the interests of companies.The People's Republic of China amended?Company Law?to incorporate the Directors' Duty of Care for the first time in 2005 and lawmakers quoted “Duty of Diligence” from Common Law System in legal languages.Article 147 of Company Law is enacted that directors,supervisors and senior managers shall comely with the provisions of laws and administrative regulations and the articles of association of the company and bear fiduciary duties towards the company.Directors,supervisors and senior managers shall not abuse their duties and rights to receive bribes or their illegal income and shall not convert company assets.In addition to the principles of Article147 above,there is no more stipulation about the specific content of Directors' Duty of Care.This brings a series of questions: What is the Directors' Duty of Care? What are the criteria for judging Directors' Duty of Care? How determine the directors have done Duty of Care? Are there any reasons for directors to be exempted? What is the business judgment standards? If the questions above could not be solved well,local courts in different places will adopt different standards when judging cases in practice.Besides,the unpredictability of judgment standards will make the directors confused in specific affairs.At this time,the directors prefer to adopt a conservative businessstrategy in order to "protect themselves," and would not like to take a proactive business strategy to expand the company's operation.This approach will not only easily damage the impartiality and dignity of our country's law,but also be conducive to the development and growth of the company;therefore,it is fundamentally detrimental to the long-term interests.As an important part of directors' obligations,Directors' Duty of Care is significant to urge the directors to exercise their power actively,fulfill their obligations properly and realize the long-term development of the company.Based on the research on Directors' Duty of Care,this paper studies and organizes the related theories to improve the regulations of this approach in order to make Company Law of China better.The thesis includes four chapters in addition to the abstract and the introduction.The first chapter is the basic theories of Directors' Duty of Care.This part analyzes the basis of Directors' Duty of Care,which is about the relationship between the directors and their company.Besides,the first chapter analyzes the contents and standards of Directors' Duty of Care;and then it sorts out the elements of the responsibilities of the directors.The second chapter introduces and compares the provisions concerning Duty of Care in Common Law System with in Civil Law System,and then elaborates on the advantages and disadvantages of their respective regulations and the meanings to China.In this chapter,it focuses on the introduction of the U.S.business judgment standards.The third chapter combs and analyzes the?Company Law of the People's Republic of China?and the relevant provisions on Directors' Duty of Care;besides,it points out the deficiencies and analyzes the reasons of the lack of regulations.The fourth chapter is based on the foregoing analysis,combined with useful foreign experiences and the Chinese reality,and given specific suggestions to improve the duties of directors in our country.