Determination Of The Independent Director's Duty Of Diligence

Independent director,as defined in china's legislation,refers to the director who does not hold any position in the company other than a director and does not have a relationship with the listed company and its main shareholders that may be employed to prevent him from making independent and objective judgments.The independent director system originated in the United States.China has introduced this system since the 1990 s.Judging from the practice of the system in China,independent directors have played an active role in improving the governance level of listed companies and safeguarding the rights and interests of minority shareholders.However,there are still issues that cannot be ignored in determining the responsibilities of independent directors.In practical cases,independent directors are usually found to be unduly diligent and subject to administrative penalties for signing documents that involve information disclosure violations.The distinction of the responsibility between the independent director and the internal director is often reflected in different amounts of penalties,but the content and boundary of the independent director's diligence are not actually clear and unified.The court's determination of the responsibility of the independent director often revolves around the regulator's determination that the independent director is not diligent.Since the legislation does not distinguish the independent director from the internal director,issues concerning the content and judgment standards of independent directors' due diligence cannot be clearly guided in practice.This article is mainly divided into five parts to discuss the boundary of independent director's duty of diligence and the limitation of responsibility of independent directors.In the first part,the author sorts out the problems in the determination of the responsibility of the independent director in practice.The difficulty in practical identification lies in the determination of the independent director's diligence.Thepractice agency equates independent directors with internal directors,which shows that the content of the independent director's duty of diligence is not clearly defined.In addition,the criteria for judging the diligence obligations of independent directors is not clear.Therefore,there is a lack of clear guidance on the determination of whether independent directors have violated the obligation of diligence,and the independent directors are exposed to liability risks that do not match their interests.In the second part,the author defines the content of diligence of independent directors.Given their different roles,it is clear that the content of diligence of independent directors is different from that of internal directors.The author analyzes the rules and doctrines of American law,sorts out the discussions in China's academic circles,and combines the rules and empirical analysis of our country to position the functions of independent directors in China.Then,based on the duties of independent directors,the specific content of independent directors' diligence is defined.In the third part,the author discusses the judgment standards of the independent director's duty of diligence,which is the core issue involved in the determination of independent directors' liability.In terms of duty of diligence,this article adopts objective standards as a general judgment standard for the performance of independent directors' diligent obligations.In terms of specific judgment standards,it should focus on the behavior of independent directors,the subjective status of independent directors,the objective loss of the company,the relationship between the independent director's behavior and the company's illegal behavior.In the fourth part,the author analyzes the guarantee of the performance of independent directors' due diligence,and discusses the issues of information acquisition and reasonable trust of information involved in the performance of independent directors' due diligence.In the fifth part,the author analyzes the equitable mechanism of the independent directors' diligent obligations,and discusses the limitation of independent directors' liability from two aspects.First,establishing a liability limitation mechanism.On the one hand,the liability of independent directors is exempted in advance through the limited liability contract,and on the other hand,the liability of independent directors is exempted through the shareholders' meeting,thus providing double protection for independent directors in terms of liability limitation.Second,improving the independent directors' liability insurance mechanism.Not only should the scope of independent director liability insurance be clarified,but also the specific commitment ratio.This article focuses on the issues related to the duty of diligence in the determination of the responsibility of independent directors in practice.On the basis of analyzing and studying,the authorhopes to perfect the system of independent director's duty of diligence.