Directors’ Fiduciary Duties Of Target Company In China From The Perspective Of Takeover Defense

“Global economic integration” not only drives the prosperity and development of China’s capital market but also leads to the intensification of competition in the capital market.On the one hand,as an important way of asset restructuring,corporate acquisition can guide the efficient flow of social capital to realize the optimal allocation of resources.On the other hand,hostile takeovers that focus on short-term profits and go against the company’s long-term development goals are also emerging one after another,thus triggering the target company’s fear of “barbarians at the gate”.In the face of increasingly frequent hostile takeover events in the market,an effective takeover defense strategy is the foundation of the company to protect its own interest.Based on the professional ability required by their positions,directors play an important role in safeguarding the interests of the company in the anti-takeover process.They can influence whether an acquisition can achieve the expected results through their control of the acquisition process,which is closely related to the development prospect of the company and the actual interests of shareholders.Any decision of a director may have the dual purpose of safeguarding the interests of the company and preserving his position.Therefore,the directors may give priority to their own interests and ignore the interests of the company during the process of takeover defense,and blindly implement takeover defense to hinder the acquisition,which may lead to the loss of the possibility for the company to obtain better development prospects.Or,in the face of inevitable acquisitions,the directors may slack in performing their own duties,which may result in impairment of the company’s interest.Under the above background,what role should the directors of the target company play in this battle for corporate control,and how to perform their fiduciary duties under the concept of maintaining the maximization of the company’s interests has become an unavoidable issue.At present,the relevant provisions on the specific requirements of the fiduciary obligations of the target company directors are too principled,and the provisions on the accountability of directors for breaching fiduciary obligations are far from perfect.Therefore,based on the emergence and the concept of directors’ fiduciary in takeover defense,this thesis will try to improve the relevant legal system in order to provide the judge with a clear standard of the application when judging the relevant case.This thesis is divided into four chapters.Chapter one explains the reason why directors should undertake the fiduciary duty in the process of takeover defense.Through the analysis of the basic theory of takeover defense,it is clear that the negative effect of hostile takeover should be restrained by perfecting the legal system,which leads to the discussion of regulating the behavior of target company directors with fiduciary duties.And then through the analysis of the relationship between directors and companies,it is clear that the fundamental cause of directors’ fiduciary duties is to balance the unequal status between directors and companies.However,in the process of takeover defense,the directors enjoy a more advantageous position because of the agency costs,the lack of d constraints,and the directors’ ability to actually control the takeover defense.Therefore,it is necessary to impose on the directors of the target company such a fiduciary duty to regulate their behavior in the process of takeover defense.The second chapter analyzes the main content of fiduciary duty in a reverse takeover.This chapter is divided into four parts,the first part states the relevant provisions of the fiduciary duty of the target company directors.The second part analyzes the above-mentioned provisions and clarifies that the current legislation has the problems of lacking specific requirements and a perfect accountability system.The third part and the fourth part respectively analyze the principles that should be followed when clarifying the specific requirements of the target company directors’ fiduciary obligations and the content of the target company directors’ fiduciary obligations,which lays the foundation for the improvement of the relevant legal system.Chapter three analyzes the specific requirements of fiduciary duty of target company directors at different stages in the acquisition process.The content of loyalty duty and diligence duty of target company directors are abstract and principled.Therefore,based on the research on the content of directors’ fiduciary duty,this chapter further discusses the specific requirements of fiduciary duty in each stage of the acquisition process in combination with takeover defense practice.Finally,it is concluded that the fiduciary obligation requires the directors of the target company to actively prevent potential risks before the acquisition,actively seek the best offer during the acquisition,and actively reflect on the operation strategy after the acquisition.In addition,the resigned directors should continue to abide by the fiduciary duty.The fourth chapter gives improvement suggestions for the accountability system of the target company directors for breaching fiduciary obligations in the takeover defense.Under the current legislation,the accountability system for the target company directors’ breaching the fiduciary obligations is far from perfect,and there are many problems such as confusion in the scope of responsibility,and unclear liability consequences.To solve these problems,the following series of improvement opinions are put forward: That is,by clarifying the exercising subject of “disgorgement”,strengthening the application of the shareholder’s representative action,establishing a system for the third party to directly sue directors to improve the subject of liability investigation;By clarifying the liability for breach of duty of diligence and the extension of the directors’ duty of loyalty after leaving the target company to improve the scope of liability investigation;By clarifying the civil compensation liability and strengthening the administrative punishment to improve the liability consequences.