The Validity Regulation Of Director’s Self-dealing Transaction

In the operation and management of a company, the director’s self-dealing transaction is notprohibited completely by laws. As the indigenous two-side effects of director’s self-dealing justdemonstrate the possibility of injustice, so what the law shall forbid is the one that is unjust.Therefore, the matter about how the director’s self-dealing transaction can be validated by lawbecomes a problem that can not be ignored. Then, this paper regards this validness regulatorysystem as study subject, and tries to research the basic elements and different circumstances for thevalidity of director’s self-dealing transaction.Firstly, the first part of this paper generally introduces the related theories, and clarifies theconnection between the self-dealing transaction and affiliated transaction for identifying the studysubject. At the same time, in order to ascertain the scope of the subject of the director’s self-dealingtransaction, the writer divides this special dealing into direct director’s self-dealing and indirectdirector’s self-dealing. At last, on the base of this kind of transaction, the paper analyzes itsdistinctness for the later argument.In the second part, the writer focuses on Chinese present legislation about the validity of thedirector’s self-dealing transaction from both“company law”and“contract law”,and figures out theirshortages. Then, in consideration of these disadvantages, the writer believes that it is the lack of theconcrete regulations about the validity of the director’s self-dealing transaction that leads to somebland points in theory and practice.As to the third part, the writer proposes that the first thing shall be done to perfect thevalidness regulatory system of director’s self-dealing transaction is finding out the basic valueprinciples according to the practical situations and the convenience of the company’s management.Therefore, as the director’s self-dealing has two sides, the paper holds that only by handling therelation between fairness and efficiency, can the just transaction be protected and can the unjust onebe prohibited. On the other hand, the paper emphasizes the importance of procedural fairness andsubstantial fairness, and holds that although the procedural fairness can pull the transaction to beimpartial, it shall not take over the substantial fairness completely.On the strength of aforesaid argument, the forth part expounds how to set up the validnessregulatory system of director’s self-dealing transaction under the law of our country. In the writer’sopinion, it is better to establish this system under company law, because this solution can benefitthe management and conform to the principle that the special law has the priority over the normal one. Then the validity elements of the director’s self-dealing transaction are discussed fromprocedural and substantial aspects and different situations that lack some or all of the elements arealso discussed. In the end, regarding to the performance of the right to revoke a director’sself-dealing, the writer also does some researches. Through this paper, the writer wants to show herunderstanding about this study subject. If there are something wrong, they really needimprovement and maturity.