Directors Of Non-competition Studies

Prohibition of business strife, one of the duties of directors, is a major issue in the modern corporate governance structure. As a result of the separation of the ownership and the management of the corporation, the power of directors having no ownership in deciding the production and management of the corporation is being strengthened continuously. Thus, in order to preclude those powerful directors from embezzling and jeopardizing the interests of the corporation and the shareholders, western countries have promulgated laws to ensure their duties including the duty not to compete. Prohibition of business strife duty has the theoretical grounds in economics and jurisprudence. In the last ten years, China published some laws and regulations regarding the definition and disposal of the directors' act concerning the prohibition of business strife. However, this system did not work well due to some deficiencies and defects, particularly the inconsistency with the subject scope, the uncertainty of the term, the obscurity of the competitive limits, the imperfection of the legal liability system and the scarcity of necessary flexibility. On the basis of the research on the connotation, the theoretical basis and the relevant systems of several countries, this article advances four fundamental principles for the establishment of prohibition of business strife system in China - legal interests equity, rights consistent with obligation, mitigating discrimination treatment and litigation remedy. Furthermore, this article proposes five suggestions, i.e. to change absolute prohibition into relative prohibition, to unify the subject scope, to define the term limit, to define the extent of the duty and to perfect the legal liability system. The author believes that the establishment of the legal system of directors in modern enterprises with the prohibition of business strife duty as its core will have great significance in perfecting the corporate governance structure and in ensuring the cooperation' s healthy development.