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DUTIES OF DIRECTORS & THEIR ENFORCEMENT
董事的义务及其执行
DEFINITIONS & NOMENCLATURE定义及术语De jure
Shadow De factoNominee
Executive and non executive
SHADOW DIRECTORS 影子董事• A person in accordance with whose directions
or instructions the directors of the company are accustomed to act.
• (S 251 of the 2006 Act). 6.3• Statutory creation. Can be corporate director• Influence a governing majority and does not
have to be the life of the company.• Judicial definition by Morrit LJ. 6.3
DE FACTO DIRECTORS 事实董事• Assume the role and status of a director.• Judicial definition: Company held him to be a
director.• Or he himself places himself on equal footing
with other directors.• Undertook functions of a company director
and not just management duties.• Judicial definition and judicial test. 6.7
Nominee directors 代名董事• Definition – a commercial term, may consider
the interest of his appointer and must not conflict with the interest of the company.
• Duties of a nominee director – judicial outline by Warren J in Re Southern Counties Fresh Foods Ltd. 6.14
APPOINTMENT & RESIGNATION任命和辞职Responsible for the management powers and this will
be provided in the articles.Private companies: at least one. Public: at least two. A
company must have at least one natural person as a director.
He can resign anytime. May be a breach of contract. He cannot appropriate the assets of the company such as a maturing business opportunities, property or business or confidential information. Can compete.
DUTY OF CARE & SKILL AT COMMON LAW 普通法上的尽职义务Not liable for errors of judgment.• Not to exercise higher performance of his
duties based on his level of knowledge & experience.
• Not bound to give continuous attention to the affairs of the company.
• Can delegate duties to employees and officers.• (Re City Equitable Fire Insurance Co Ltd)6.23
DUTY OF CARE & SKILL – STATUTORY 成文法上的尽职义务• Objective test: the general knowledge, skill &
experience reasonably expected of a director.• Subjective test: the general knowledge, skill and
experience that the director has.• Executive director – reasonably expected of him,
e.g. finance director. Non executive director is not expected to give full time to the company.
• (S 174 of the Companies Act 2006).6.28
FIDUCIARY DUTIES AT COMMON LAW普通法上的受信义务 • No conflict rule – no profit rule. First, cannot be
swayed by personal interest. Second, accountable for any profit or gain obtained as a result of fiduciary position. 6.36
• Duties owe to the company and not to shareholders individually or collectively.
• Cannot enter into transactions which conflict with the company. Best interests of the company and cannot favour close relations.
FIDUCIARY DUTIES AT COMMON LAW普通法上的受信义务• With shareholders’ consent, he can retain
profits.• Non disclosure of the conflict is in itself a
breach regardless of whether there is exploitation by the director.
• Presence of good faith and in the interest of the company.
STATUTORY FIDUCIARY DUTIES: GENERAL DUTIES成文法中的受信义务：一般义务
• Owed duty only to the company.• Loss for breach must be company’s loss and
recovery will be for the company.• An ex director is prohibited from exploiting for
his benefit “any property, information or opportunity of which he became aware of at a time when he was a director.
• S 171 to 177 of the Companies Act 2006
DUTY TO ACT WITHIN POWERS仅在权限内行为的义务• Act in accordance with the constitution.• Exercise powers for the purposes for which
they are conferred.• Good faith is not a defence.• Shareholder’s remedy: derivative action to
oblige a director to observe constitution.• S.171 of the Companies Act 2006.
DUTY TO PROMOTE THE SUCCESS OF THE COMPANY 致力于公司成功的义务
• S 172 (1) of the Companies Act 2006.• Inclusive manner. Success of the company will benefit
members. Success replaces best interests of the company. Success means long-term shareholder’s value.
• Due recognition to the interests of others (employees, customers, suppliers and the community.
• High standard of business conduct.• Act fairly between members of the company.• S 175 (2). 6.51
DUTY TO AVOID CONFLICT OF INTERESTS 避免利益冲突的义务• Direct or indirect interest that conflict or may
conflict with the interests of the company.• A person cannot be a director of 2 companies
competing with one another.• Exploitation of property, information or
opportunity which gives rise to conflict of interests. Excludes those which a director has no duty to pass to the company.
DUTY NOT TO ACCEPT BENEFITS FROM THIRD PARTIES 不得从第三方获取利益的义务
• Third parties include associate companies, persons other than the company and individuals acting for the company.
• Benefit must be by reason of being a director• Benefits include pecuniary and non pecuniary benefits.
Include indemnity given to a company to act as a director of another company. There must be a conflict of interest and not de minimis in nature. Does not include director’s own company for providing services to the company and the director receives remuneration.
• S 176 (1) of the Companies Act 2006 6.62
DUTY TO EXERCISE INDEPENDENT JUDGMENT (S 173(1)独立判断的义务 (S 173(1)
• Excercise judgment in the interests of the company and not to abdicate this duty by acting on the instructions of third party or another director.
• For example, the directors may have to agree to a restructuring of the company with issuance of shares to a designated party and allotment to be done in a particular manner.
• Constitution can provide the need for independent judgment for a nominee director.
DUTY TO EXERCISE REASONABLE CARE, SKILL & DILIGENCE (S 174)合理尽职及谨慎义务 (S 174)
• Expected of a person carrying out the function carried out by the director in relation to the company. Objective test.
• The general knowledge, skill and experience that the director has. Subjective test. For example, the special skills of directors, an accountant, a lawyer or CFA etc.
• Reflects common law except there is a need for carrying on of such a duty continuously. 6.70
CIVIL CONSEQUENCES FOR BREACH OF GENERAL DUTIES 违反一般义务的民事后果
• Consequences and civil liabilities: governed by common law or equitable principles.
• Covers issues of substantive remedy (for e.g rescission, accounting for profits etc) and causation and foreseeability.
• Enforcement: same as for breach of fiduciary duty.
• S 178 (1) and (2). 6.75
PRC Law – DEFINITIONS & DUTIES OF DIRECTORS中国法 – 董事的定义和义务• No inclusive definition.• Duties to company owed by directors, supervisers
and senior managers. Duties include loyalty and diligence.
• See art 148 of the PRC Company Law 2005.• Duties owe to the State, employees, shareholders,
creditors and the community.• There should be corporate social responsibility,
interests of the community or environment. Art 5 and art 17 of the PRC Company Law 2005.
CSRC GUIDANCE FOR LISTED COMPANIES 2006 证监会关于上市公司的指引 2006
• Due diligence in compliance with articles of association, law and administrative regulations.
• Care, caution and diligence in ensuring company’s business activities are in compliance with the law, administrative regulations and other state economic policies and its licence does not exceed its scope.
• Treat all shareholders impartially.• Article 98. Test: Objective.
PRC Law: DIRECTORS’ AVOIDANCE OF CONFLICT OF INTERESTS中国法：董事对利益冲突的避免
• Misappropriating company’s funds.• Using company’s funds or assets to provide guarantee or
entering into a contract in violation of the articles.• Seeking business opportunites for himself or operating a
business in direct competition with the company.• Keep commissions arising from transactions between the
company and others.• Illegal disclosure of company’s secrets.• No provision for ratification by shareholders’ meeting.• Art 149 of the Company Law 2005.• Art 125 does provide for decision at board of directors’
meeting and shareholders meeting but only for listed companies.
CSRC GUIDANCE FOR LISTED COMPANIES 2006证监会关于上市公司指引 2006
• Provision for avoidance of bribes or other illegal gains or encroach on the property of the company.
• Provides for “consent of shareholders’ meeting” in relation to business opportunities.
• Provides for any financial gain of the director to be for account of the company plus compensation for causing any damage to the company.
• Art 97.
PRC Law: CESSATION OF OFFICE中国法：任职的终止• No provision for liabilities after cessation of
office of directorship under Company law.• Make references to Labour Contract law in
relation to secret profits, intellectual property and non competition. See articles 23 and 24.
• Art 101 of the CSRC’s Guildance does make provision for continuance of duties as stipulated in the articles of association of listed companies.
Thank you
• www.chinasymposium.com
