Research On The Regulation Path Of Directors’ Self-dealing Effectiveness

Self-dealing refers to transactions that are implemented or promoted by company directors and executives that contain their personal interests and conflict with the company’s interests.With the rise of corporate management,self-dealing has always been a frequent problem in corporate governance and regulation.In order to resolve such conflicts of interest,the company laws of various countries have gradually established a series of systems to regulate them.Article 148,Article 21 of Company Law of the People’s Republic of China plays an important role in regulating the self-dealing of directors.In the process of rapid economic development,a large number of related transactions,such as directors’ self-dealing,have emerged on the track of social development,but the overall system shows that the legal regulation of listed companies is relatively perfect,while the legal regulations in the “Company Law” are not systematic.Based on this,this article retrieves relevant directors’ self-dealing cases through Wolters Kluwer’s legal information database and China Judgments Online,shifts through the theories and judgment rules about the validity of director’s self-dealing contracts,and finds that there are certain logical contradictions,confusion in the application of paths,and insufficient consideration of the characteristics of limited companies,lack of corporate interest concepts and other issues,and this is also one of the directions that needs to be clarified in current judicial practice and future company law revisions.The current judicial practice is mainly based on the mandatory dichotomy path to determine the validity of the director’s self-dealing contracts.However,this path has been criticized a lot.And there are also disputes in the academic community about whether item 4 of article 148 of the company law is administrative mandatory provision or effective mandatory provision.In judicial practice,most judgments are ultimately made based on whether the company’s interests are damaged,there are some phenomena in essence,such as "resolutions are passed but harms the interests of the company","no resolutions are passed but it is beneficial to the company" are administrative provisions,and "failures to pass a company resolution and harm the company" are mandatory provisions,which greatly affects the unity of justice.In recent years,the method of re-identifying mandatory provisions from the perspective of the normative purpose of mandatory provisions and comprehensive benefit measurement has gradually returned to the field of vision.Under the normative positioning,the normative purpose of item 4 of article 148 of the company law still can not be clearly identified.There are two viewpoints of risk aversion and protection of the company’s interests.If it is risk aversion,the validity of the contract that harms the company’s interests is not necessarily invalid.If it is protection of the company’s interests,it needs to be discussed in detail with the specific meaning of the company’s interests.In addition,in terms of specific validity rules such as contract revocability,the Civil Code does not explicitly stipulate for the time being to supplement the validity judgment of the new type of contract such as conflict of interest transaction.The traditional validity rules can be said to be "Willing but unable."Regarding other path issues,some judges in judicial practice use the self agency theory of Article 168 of the Civil Code as the basis for determining the validity of the contract.As long as the company agrees or ratifies,the directors’ self dealing contracts have legal effects,even if it is not agreed.It is also effective for the company’s purely profitable behavior,which further affirms the importance of the company’s substantive interests.But there are still some defects in this path: one is that the relationship between directors and the company is different,which can not be accurately defined;second,the internal complex relationship between different types of companies is not considered,which makes the company’s consent or ratification unfair.The question of avoiding voting right is not clear,which makes the resolution procedure unable to effectively deal with the test of conflict of interest.Even if it is stipulated that non-interested parties will be separated from the scope of the resolution in the future,it will be difficult for a limited company to have a true non-interest in the close relationship.Even without considering the type of company and jumping out of the assumption of a rational economic person,it is difficult for non-interested parties to avoid favoritism decisions among directors.Therefore,the issue of the validity of directors’ self dealing still needs to go back to the company law to think about the entire process,and use external forces to identify it.Returning to the perspective of company law,one has to mention the American fair transaction rule,which has been an important research object in the field of directors’ self-dealing regulation.fair transaction rule combines procedural fairness and substantive fairness,that is,court judicial review,to deal with conflicts of interest transactions,which can be regarded as a textbook model.Due to the different political,economic and cultural traditions of different countries,the judicial review standards of the United States,such as commercial judgment rules and “waste” standards,are relatively unfamiliar,and the system is not yet perfect.The establishment of a director’s self dealing validity review model in my country cannot blindly copy foreign practices,but it is certain that the participation of external forces can effectively solve the problems caused by the complex internal relations of the company hidden injustice,and in the current trend of more and more emphasis on the interests of the company,external forces can maintain the real interests of the company to the greatest extent.The company is moving from tradition to the future.The company has been expanding in scale,increasing in number,and accumulating wealth.It has also produced unprecedented aggregation power.Whose interests are the company’s interests? We need to carry on with this issue and re-examine the vadility of directors’ self-dealing from the perspective of company interests.