On The Directors' Liability To The Third Party

In the theory of company law, the directors' liability is divided into two parts, that is, the liability to the company and the liability to the third party. In the modern government of company, the directors master the widespread actual right gradually, and become the core of the power. In order to prevent the abuse of the power by the directors and protect the legal interest of the shareholders and creditors from infringing by the illegal conducts of the directors, an important choice for most countries is to impose heavier liability on the directors and establish the system of directors' liability to the third party which contains the shareholders, creditors and so on. In specific, this paper is divided into four chapters, the logic and structure are as follows:I . The foundation for the theory of the directors' liability to the third partyThis part is the core of this paper. The notion of "the third party" and "the director" are firstly defined, With reference to the scope of the third party, it is supposed to be composed of shareholders, creditors and interested party in broad sense, as the content of the paper is limited, the third parties only contain shareholders and the creditors in this paper. In the defining of the directors' scope, this paper uses other scholars' method for reference. Beginning with the classification of directors, this paper analyzes the body of the directors' liability to the third party, and the degree of liability that should be assumed by the directors. It is composed of the following five sections with reference to the foundation for the theory. Section one is devoted to the reconsideration of the theories on essence of the legal person. In the comparison between fictionstheorie and theorie der realen verbandsperson, it can be concluded that the latter shouldn't been simply and partially comprehended and adopted, and the point of view of the former on individual's effect can make up the limitation of the latter. Accordingly it establishes the basic foundation for the establishment of the system of the directors' liability to the third party. Secondly, with regard to the relationship between organ of the corporate body and legal person, traditional civil law theories differ from each other, that is representative theory and agency theory. The two theories have inherent limitation respectively. In order to perfect each other, the best way is to take strongpoint of the two theories. With reference to the directors' liability to the third party, the directors and company are both supposed to assume liability jointly. Thirdly, through the investigation of the history of the directors' liability to the third party in the continental legal system and the Anglo-American legal system, it can be discovered that the obligation foundation for the system has been established by the method of case and legislation. This is an important basis for the establishment of the directors' liability to the third party. Fourthly, in modern company theory, the structure of company government has new meaning. The theories on interested parties and social responsibility also have stimulative effect on the establishment of the directors' liability to the third party. Fifthly, there are two sticking points in the feasibility analysis of the directors' liability to the third party. On one hand, liability insurance of the directors can make up the limitation of the directors' ability for compensation, and guarantee the feasibility of the system. On the other hand, through the economic analysis, it can be discovered that the system also has function of prevention and direction besides compensation, the establishment of this system can decrease randomness and infringement of the directors' conduct.II .The character and the elements of the directors' liability to the third partyThis section focuses its attention on structuring of the system of the directors' liability in theory in base of the existing theories. With reference to the character of the directors' liability to the third party, scholars' points of view are not uniform. The character of liability assumed by the directors to the shareholders and creditors is different from that to the interested third party. Therefore the former is legal liability, and the latter is tort liability. This section is devoted to the analysis on the general elements of the directors' liability to the third party, basing on the logical premise, that is, the character definition of the directors' liability to the third party.III. The legislation of the continental legal system and the Anglo-American legal system on the directors' liability to the third partyThe countries of common-law system establish directors' fiduciary duty to the shareholders and creditors through legislation and case, and establish the system of liability in the base of the duty. In recent years, in accordance with the increase of the phenomena that the directors misuse the authority, countries of the continental legal system begin to impose heavier liability on the directors in the method of providing the directors' liability to the third party explicitly in the company law or commercial code, as what countries of the Anglo-American legal system have done, in order to protect the interest of the third party. So there are both systematic and perfect design and legislation in the two legal systems.IV. The legislation and suggestion on the directors' liability to the third party in chinaTo draw a comparison between the legislation of the continental legal system and the Anglo-American legal system and the legislation of company law and securities law in china, it can be concluded that there is an attempt to provide for the system of directors' liability to the third party. It is nothing else but an attempt. The purpose for the legislation and the application scope are limited. There is still a groping course to establish a perfect system of theory and legislation for the directors' liability to the third party in china.In the conclusion part, it can be concluded that, the system of the directors' liability to the third party in the continental legal system and the Anglo-American legal system have different development routes. To reach the same goal by different routes, the importance of this system has been acknowledged by the countries in different legal systems. This system has profound theoretic foundation and mature design. To satisfy the need of practice, company law of china is supposed to provide for the system systematically and perfectly, in order to fulfill the directors' leading function in the government and operation of company, on condition that the directors' power is accompanied by the corresponding liability.