The Research On The Judgement Standards Of Directors' Duty Of Diligence In China

The expansion of the scope of directors' authority and the increase of cases concerning directors' harm to the interests of the company in the judicial practice highlight the importance of regulating directors' obligations in law.The types of directors' obligations were enriched when the Company Law of the People's Republic of China was revised in 2005.Directors' duty of diligence came from scratch.But the legal provisions need to be tested by practice.The effective guidance to the judicial practice is the significance of the legal provisions.Article 147(1)of the current Company Law of the People's Republic of China stipulates: “Directors,supervisors and senior management personnel shall comply with the provisions of laws and administrative regulations and the articles of association of the company and have the duty of loyalty and diligence to the company.” Although,this clause provides directors' duty of diligence expressly,it is very general.What are the specific types of the duty of diligence? What are the specific criteria for judging whether directors breach the duty of diligence or not? How to define the scope of the duty,in particular,when a director violates the duty of diligence? What should directors do to avoid liability? With the development of China's economy,the number of cases concerning directors' duty of diligence is increasing.The drawbacks of the existing legal provisions are becoming more apparent.It has caused a lot of discussions in the academic circle.Many scholars have proposed a series of improvement measures,hoping to make up for the lack of legislation on directors' duty of diligence.However,most of the existing literatures put forward suggestions of legislative improvement through theoretical research,few literatures studied the judicial cases in real life,which tended to lead to a gap between theory and reality.This paper mainly analyzes the problems existing in the practice of the legal provisions on directors' duty of diligence from the judicial cases.For example,to find out the causes of the delayed development of the legal provisions on directors' duty of diligence from the distribution of years and regions of the cases.It is concluded that the principle of the legal provisions on directors' duty of diligence is easy to cause confusion in the judicial practice from the diversification of the judgement reasons.To provide certain guidance for the legislative improvement from the types of directors' duty of diligence,the results of judgement,the compensation of the directors who breach the duty,etc.Through the quantitative analysis of each factor,combined with the case analysis,this paper tries to find out the problems encountered by the court in the application of the existing legal provisions in the judicial practice.This paper tries to summarize the feasible ways to complete the judgement standards of director's duty of diligence to adapt to the current development of China,not only relying on pure theoretical research,but combining with the concrete national conditions and practice requires,and referring to the overseas mature experience.This paper will discuss and propose feasible methods to complete the judgement standards of directors' duty of diligence from two perspectives,the legislative perspective and the judicial perspective.On the legislative perspective,firstly,the law should establish the standard of the duty of diligence.The standard of the duty of diligence concludes three components: to establish the standard of the duty of diligence “with objective standard as the main and subjective standard as the auxiliary”,to divide the type of the duty of diligence into the duty of performance and the duty of decision-making,to establish the inversion of the burden of proof.Secondly,the law should establish the standard of liability on a gross negligence and exemption when a director causes a loss to the company.On the judicial perspective,in view of the new situations and new cases in the real life,when the law cannot make effective judgements,the law should authorize judicial interpretation to provide provisions according to the accumulation of cases.At the same time,the law should regulate judges' judicial discretion through judicial interpretation.This paper hope to complete the judgement standards of directors' duty of diligence from the two aspects.