Discussion of the Director Duty Act

Abstract noncompete is director of an important obligation, a duty of loyalty is an important manifestation of directors. Directors are generally involved in the company's management, the company's business, trade secrets, major business decisions, major investments and other major insider information well aware of the situation, if allowed to directors for their own profit belonging to the company or a third party engaged in the trading range, the Directors may use their understanding of the company or business relationship secret for their own personal gain, to the detriment of the interests of the company and our shareholders. China's current 'Company Law' non-compete obligations on directors explained, but required more abstract. This paper tries to compete obligations through the analysis of our directors, directors of our law that the non-compete obligation shortcomings and further proposed suggestions for improvement.

Paper Keywords Directors noncompete Legislative Defects suggestions for improvement

Directors is the company's actual business managers, the company is the behavior of specific actors economic exchanges. Thus, national laws provide that the directors in the exercise of their duties must fulfill certain obligations, the company is just an investment tool to shareholders and the company hopes to use this investment tool to get return on investment. Accordingly, the directors of the company's obligation is the obligation to shareholders, only the shareholders as a whole and obligation, rather than a certain type of individual shareholders or shareholder obligations.

I. Overview of Directors noncompete

(A) The concept of noncompete noncompete director, also known as 'non-competition', that shall not engage in competitive business; company law noncompete provisions of the Act is a company director, manager, or as not self- the company of others of similar businesses that are engaged in business or harm the interests of the company's activities.

(Two) directors of the legal characteristics of a non-compete. Director Duty is a negative obligation not civil obligations as a civil party to the legal relationship in order to satisfy his actions should be implemented by Fangli Yi limits  Bi. From the director of the notion that non-compete, it is the duty of people in accordance with the law or by prior agreement on the rights of people bears no obligation to act as a competitive industry.

2. Director Duty behavior is a limitation acts of unfair competition in violation of Directors implemented Jingye principle of good faith, and it worked against the interests of the company. But Jingye behavior and our acts of unfair competition through said there is a difference. First, the former is prohibited in certain circumstances legitimate commercial behavior of the latter is prohibited illegal business practices. Secondly, the former is regulated by specific rights and obligations between subjects, which is the general market norms between the main rights and obligations.

3 Director Duty of a certain time and area restrictions on the time limit and tenure of directors within a certain period after leaving office; area, should be limited to the company's business areas and companies have started to develop or prepare development regional scope.

Second, our Director Duty system problems

(A) for a period not clear our current law does not explicitly require the directors shall perform non-compete obligation beginning and ending time. According to China's 'Labor Contract Law' Article 16 of the time limit on non-compete provisions are: 'In the dissolution or termination of the labor contract, the preceding paragraph personnel to the operation of the units of production or similar products, have engaged in similar business competitive relationship with other employers, or their own production, or opening operation similar products, engage in same type of business period shall not exceed two years. ' Given that the Directors and the company is not generally a labor contract relationship between this provision can be applied to directors of the Company after leaving the competition act or whether the reference to the applicable industry worth considering. Term limits are essential Directors noncompete clause, if the time limit is short, the employer is not conducive to business information and other secrets protected too long and directors violated the legitimate rights and interests. Meanwhile, with regard to the effectiveness of directors and subject to non-compete period, also denounced the lack of specific provisions.

(Two) lack of geographical restrictions geographical restrictions on the legal director of the Company shall be the geographical scope  competing industry vertical. Germany, Japan and the UK director noncompete case are provided for geographical restrictions, China is not such a requirement. China's 'Company Law' Article 70 provides that 'state-owned company's chairman, vice chairman, directors, senior management, state-owned asset management institutions without the consent of the other limited liability companies, joint stock companies or any other economic organization '; Article 149, paragraph 1, the fifth paragraph 'Directors, senior management following acts are prohibited: shareholder or shareholders' meeting without the consent of, the use of his office to seek for themselves or for others belonging to the company's business opportunities, self-or others run the company he works similar business. 'This provision seems to mean the geographical scope refers to the country. Even if we speculate that refers to the country, it may not be reasonable, and some smaller companies, the business scope is limited to the province. If the director after the departure of the original companies operating in the provinces the same business, but did not form a competition with the business of the original company, this should be allowed, but also conducive to economic development. And if according to China's 'Company Law' provides speculated that in the nationwide ban is unreasonable.

(Three) Jingye range blur First, existing law 'self or for others business' be defined clearly. 'Self' is the name refers only to their own business, or whether it also included, although not in its own name but vested interests in their own business? For others 'management' is to define the name of vested interests, or to be defined? Secondly, the current law does not clearly define what is similar businesses. 'Kind' of that business license or articles of association is enshrined in the subject, or to the actual operations prevail? The author believes that 'similar business' can be understood as including competing and non-competing business operations, including the operations of the company's business outside the geographical coverage and the company has no intention to develop the local business and the company can not be considered competing businesses.

(Four) directors violate the legal duty not fully compete obligations should bear the legal responsibility, in which only the civil law consequences referred to 'disgorgement' and 'the right to compensation.' China's relevant laws and regulations do not prohibit the directors are being implemented to give a clear competitive business conduct requirements, including without limitation the right as requested, scheduled period, none other way to stop the infringement of specific provisions. While foreign large have more specific requirement that companies are entitled to stop the infringement claim, the directors have 'to stop the infringement,' the obligations. Second, China's 'Company Law' has not been included in the exercise of the right of aging, which gives the company the right to leave the exercise included a larger space, but not into the normalization may produce negative effects.

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Third, our Director Duty Perfection suggestions

(A) clear deadline range directors noncompete period, the law should give a specific range. Law in China should abide by the Directors after leaving the non-compete obligation does not require, but for independent directors, reference may be applicable to the 'Labor Contract Law' Article 24, paragraph 2: In the dissolution or termination of the labor contract, the preceding paragraph personnel to the operation of the units of production or similar products, engaged in similar business competing with other employers, or their own production, or opening operation similar products, engage in same type of business period shall not exceed two years. This provision applies to non-independent directors is also very reasonable proposal to the Act by adding such a requirement for all directors. While leaving the director and the company signed a contract situation, also refer to the 'Labor Contract Law' Article 24, paragraph 1: competition restrictions is limited to the employer's personnel senior management, senior technicians and other personnel confidentiality obligations . The scope, territory and term agreed upon by the employer and the worker, the non-competition agreement shall not violate laws and regulations.

(Two) perfect geographical restrictions geographical restrictions is director noncompete provisions shall not carry competing industry laborer geographical scope. English noncompete area that size range with the original business unit general area of ​​influence and market share and other factors, any expansion of non-competition areas or employer shall not engage in the same industry generally would constitute a violation of the autonomy of workers careers. Most believe that the geographical scope of the company and the directors should have a substantial competitive relationship may be operating in the region for the Prohibition of the restricted area. I believe that this alone is not comprehensive enough. To improve the geographical restrictions must also consider the provisions of the statutory directors noncompete time limit.

(Three) perfect domain restrictions 'Company Law' provisions of Article 149 of the noncompete field limit is 'the same kind of business.' I believe that should be 'similar business' legal concepts to make more detailed, more clearly defined. Director noncompete restrictions on field staff should be working in this unit or may be exposed when trade secrets or other important information corresponding to the range and can not be extended to industries, but shall not extend to independent professionals and business secrets of the master general knowledge, experience, skills and other industries outside the range.

(Four) improve the legal responsibility of a. Do not claim perfection as I believe that as long as the directors violated the non-compete obligation, the company has the right to ask it to stop competing business behavior, not to the extent of the Directors at fault. Is based on the general principles of civil law, in breach of its obligations obligor, implementing acts harmful to the rights holders, the rights holders the right to ask it to stop violations of the obligation. Such as China's 'Civil Law' Section 134 would 'stop abuse' is defined as a way of civil liability. Both as a director responsible commitment 'to stop infringement of responsibility,' Correspondingly, as rights holders should enjoy the company since the 'Stop infringement claims.' If the shareholder first found violations of non-compete obligations of directors, the right to require the Company to directors exercise 'not as claims,' ​​while the existence of such a claim should not be to the extent of directors fault exists, and whether directors should be objectively engaged in prohibited Jingye prevail. Recommended in the 'Company Law' add the following: the right to require the company violated or is about to violate the non-compete obligation to stop the acts of directors, the company delayed in exercising, the shareholders the right to require the exercise. Ie as long as the director is still underway or about to carry out statutory prohibition of competing industry, there is not a claim.

2. Disgorgement of the perfect director for the illegal exchange for interests in competing business, owned by the company, that company enjoys disgorgement, also known as the right to win. China's 'Company Law' Article 149 In this connection there is a corresponding provision. However, the prerequisite is director profitable if it is not profitable, disgorgement unable to exercise. Disgorgement is a right of formation, based on their effectiveness, with a unilateral intention by leaving the existing legal relationship between the ability to change. Most countries provides for the disgorgement of aging and scheduled period. Japan and Taiwan disgorgement of law for one year duration, or benefits from the transaction occurs starting, this should be scheduled period. German law provides that the period from the board of directors or supervisory board members know or should have known from the time of the obligation arising three months or benefit from the transaction occurs five years. Disgorgement longer required for the scheduled period is appropriate because the exercise shall be included in the resolution the company organs, so that the period can not be too short. Recommendations of the 'Company Law' to add the limitation on the company disgorgement is classified in the exercise period of one year, since the company knows or should know the date, more than two years of practical limitations shorter. However, since non-compliance with the preceding paragraph shall exceed five years from the date of the company's outstanding disgorgement, disgorgement eliminated.

3. Right to damages for breach of directors improve the company compete obligations to their losses in case, you can request compensation for the actual damage caused by the Directors rights. Directors of the Companies Act did not violate the non-compete obligation to provide for the liability, which needs to be filled. Director damage the company violated the interests of non-compete obligation, the Companies Act gives victims the right to intervene in the company, while also giving it the right to claim damages, you can better protect the company's interests  Zhi. This is because: (a) from the company's perspective, in the company due to non-compliance with non-compete obligation is greater than the damage suffered Directors therefore income, the company gives victims the right to claim damages the company suffered losses can be better compensated ; (2) breach of non-compete obligation from the perspective of a director, a violation of non-compete obligations responsibilities sometimes spit income is not limited income, but also to assume greater responsibility, which is conducive to causing psychological force, thereby reducing the occurrence of acts of violation of non-compete obligations.

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