Business Judgment Rule And Exemption Of Directors' Liability

Directors and boards of directors play an increasingly important role in modern companies.Directors have broad and important rights in the management of companies.In order to prevent moral hazard and restrain directors' behavior,strengthening the regulation of directors' responsibility has become the first consideration.However,paying too much attention to the construction of directors' responsibility and neglecting the protection of directors' rights can only solve the old problems,but also bring about new ones.Too strict directors' responsibility system will restrain directors' behavior,and lead to directors' fear of hands,feet and actions.In the long run,directors will form a working attitude that directors do not seek reactive work but do nothing.This will undoubtedly also reduce the company's operating efficiency and damage the interests of the company and shareholders.The Company Law of China stipulates a strict system of directors' liability,and the ways and legal basis for directors to be held accountable are constantly improved.However,the exemption of directors' liability is limited to directors who express their objections when making decisions.Other countries with more developed corporate legal system not only emphasize the provisions of directors' responsibilities,but also have a perfect system of exemption of directors' responsibilities,which makes the rights and responsibilities of directors reach a good balance.In view of the deficiency of directors' liability exemption system in China,this paper discusses the construction of directors' liability exemption system from the perspective of business judgment rules.The exemption of directors' liability mainly aims at the diligent behavior of directors.The breach of directors' duty of loyalty does not generally involve the exemption of directors' liability.The author divides the duty of diligence of directors into the duty of diligence in decision-making and the duty of diligence in non-decision-making.For the duty of diligence in non-decision-making,we can judge it according to the standard of duty of care in our civil law.According to the Company Law of our country,directors' non-decision-making diligence should be liable for compensation to the company as long as there is negligence,which does not distinguish the degree of negligence of directors.As for the review of the duty of diligence in decision-making,the author believes that a proper distinction should be made.Directors' diligence in decision-making involves normal business risk factors.Therefore,directors' diligence in decision-making should not set too high a standard of duty of care.The director is an ordinary person like you,me and him.If there is no gross negligence in the decision-making process,the director should be able to use the elements of the business judgment rules to review,and the director's decision-making responsibility which meets the requirements of the business judgment rules can be exempted.The author advocates the introduction of business judgment rules.According to our judicial practice,we can make clear that the business judgment rules can exempt directors from decision-making responsibility through the form of statute law in the Company Law,and then clarify the meaning and applicable elements of the business judgment rules through the form of judicial interpretation.This not only maintains the characteristics of openness and development of business judgment rules,but also ensures the uniform application of business judgment rules.Apart from the introduction and conclusion,the article consists of four parts:The first part mainly explains the theoretical basis of the exemption of directors' liability.Including the generation of directors' responsibility,the meaning and necessity of exemption of directors' responsibility,the duty of diligence of directors only,and the different judgment standards of directors' duty of diligence.This paper makes a detailed analysis of the basic theory and principle of the exemption of directors' responsibility,which is helpful for the author to have a clear understanding of the rationality and necessity of the existence of the exemption system.In addition,the first part clarifies the key issue of exemption of directors' responsibility,that is,the review of directors' duty of diligence,and the rules of business judgment also play the role of exemption of directors' responsibility through the review of directors' duty of diligence.The second part mainly demonstrates the current situation of directors' liability exemption system in China,including the existing norms and the analysis of existing problems.In the second part,the author continues to raise questions in order to analyze the future chapters around the problem-solving.The third part mainly demonstrates how to apply the rules of business judgment to exempt qualified directors from liability.Firstly,the article analyses the practice of exemption of directors' liability by the commercial judgment rules of the representative countries in extraterritorial law,such as the United States and Japan.China can learn from the judicial experience of the United States and Japan,clarify the applicable elements of the commercial judgment rules,and properly reduce the diligence requirement of decision-making diligence.If directors do not have major negligence in decision-making,they should be able to follow the commercial judgment rules.The constituent elements are further examined.The fourth part mainly demonstrates how to introduce the commercial judgment rules and how the commercial judgment rules play a role in our legal environment.The author probes into the ways of introducing commercial judgment rules and perfecting corresponding supporting measures,aiming to make the commercial judgment rules adapt to China's legal practice as a whole and play their role effectively.