Research On The Avoidance System Of Directors’ Voting Rights

The Company Law of the People’s Republic of China(revised draft)(second Review draft)released at the end of 2022 involves the board of directors and directors showing a trend of strengthening the responsibility system of directors.As one of the important ways to participate in corporate governance,directors vote on the resolutions of the board of directors to exercise their functions and powers and exert their influence on corporate affairs.To some extent,the exercise of voting rights by directors is the starting point of their duties.Compared with shareholders,directors,as "outsiders",have more motivation to pursue profits.In this case,directors need to undertake a higher duty of loyalty to the company,so the voting avoidance system of directors has its reason.Only Article 124 of the current Company Law deals with the voting avoidance system of directors,while other provisions related to it are scattered in departmental regulations and industry norms with lower effectiveness.However,there are no clear guidelines for the subject and scope of application of the system,as well as the specific procedures for the implementation of the system.There are also many problems in practical application.By combing the current situation of the application of the director voting avoidance system in China,this paper focuses on the problems existing in the system.Combined with the relevant regulations on director voting avoidance in the United States,Japan and Chinese Taiwan,this paper puts forward suggestions on how to perfect the avoidance system of directors’ voting rights.This paper has four chapters.The first chapter shows the basic case and the main disputes of Vanke Board resolution revocation,which is a classic case of the application of director voting avoidance system.It is considered that there is insufficient regulation of directors’ voting avoidance in China.Then it introduces the specific content of the director voting right avoidance system.It is pointed out that due to the different roles of shareholders and directors in the company,it is considered that compared with shareholders,the identity of outsiders of directors is more likely to produce moral hazard and agency costs.Under the requirement of the duty of loyalty,the voting avoidance of directors is more legitimate and reasonable.The second chapter analyzes the application of director voting avoidance system in China from two aspects of legislation and practice.In legislation,only Article 124 of the Company Law is involved in the discussion of the legislative evolution of the system of director voting right avoidance,while other provisions are department regulations issued by CSRC and CBIRC,with relatively low effectiveness.In practice,it mainly analyzes the relevant judicial decisions,administrative penalties and regulatory measures.It is concluded that there are some shortcomings in the voting avoidance system of directors in China,such as limited subject,narrow application,lack of supporting procedures,and unclear consequence and relief mechanism of violation of the system.The third chapter mainly introduces the relevant regulations on the voting avoidance of directors in the United States,Japan and Chinese Taiwan.Among them,the United States is mainly Delaware General Corporations Law,Model Business Corporation Act and Principles of Corporate Governance.Japan and Chinese Taiwan analyze the relevant provisions in their Company Law.Through the introduction of the deficiencies of directors’ voting avoidance and the extraterritorial laws summarized above,the fourth chapter mainly improves the system from three aspects.First of all,it should be expanded in the subject of application;in the scope of application,it not only covers the basic situations such as related-party transactions,usurping corporate opportunities and prohibition of business strife,but also refers to Taiwan Company Law,in which directors should avoid the backstop situation if they have an interest in the matters resolved and may cause risks to the interests of the company.Secondly,the specific procedures of constructing the voting avoidance system of directors,including the start-up procedures of the system,as well as the disclosure of interests,avoidance of directors’ rights and prohibited behavior and so on.Finally,the consequences and remedies of violation of the system.First,the effectiveness of the resolution is analyzed when the director should avoid but does not.The second is the remedies for improperly excluding directors’ voting rights.