Judicial Application Of Corporate Opportunity Doctrine In PRC

Business opportunities are critical to a company,and its ability to continue operating is closely related to its use of business opportunities.However,in the governance structure of modern companies,there is a separation between the owner and the manager.Managers are responsible for the management of the daily business affairs of the company and have access to the business opportunities being implemented or pursued by the company due to the status.As a rational economic man,for their private benefits,managers might usurp business opportunities belonging to the company,also this phenomenon often occurred in practice,therefore,the corporate opportunity doctrine is developed based on the duty of loyalty in company law,which prohibits directors or senior executives usurping company opportunities.Since the revision in 2005,such doctrine was added to the Company Law in PRC.However,even in the common law countries where the corporate opportunity doctrine originated,this rule has been a controversial area in the study of corporate law.Although the doctrine was also established in China in 2005,the provisions of the company law only prohibit directors and executives from taking advantage of business opportunities belonging to the company,but there is no specific standard for this process.In addition,due to the lack of understanding of corporate opportunity rules in China,many courts interpret this doctrine in the framework of traditional tort,which affects the judicial thinking and argumentation process in practice.Therefore,although this provision has been applied in practice for 15 years,the court is still in a status of confusion with unclear trial logic and unclear specific determination standard.In view of this,this paper starts from the present situation of domestic judicial practice,and analyzes the main problems existing in domestic practice.Based on the comparative analysis of the experience of Anglo-American law,this paper points out the errors in the understanding of the rules of corporate opportunity in China,and reconstructs the trial logic and specific applicable standards suitable for the judicial system in China.This paper is divided into three parts: introduction,main body and conclusion.The structure of the main body part is:Chapter one,the basic theory.This chapter first gives a brief overview of the corporate opportunity doctrine,and introduces the history of the corporate opportunity doctrine in China.Then,the chapter introduces the academic basis of this rule,which is developed from the duty of loyalty of directors and executives under the company law.In addition,many scholars began to explain the cause and necessity of the rule through agency cost theory.Finally,the chapter introduces two misunderstandings about the doctrine that its essence is allocation of business opportunities between the company and its trustees,and is a balance of interests and the rule is not to protect property or to protect the civil rights under the civil law system,but a unique rule established in the framework of company law.Chapter two,the status quo and problems.Firstly,by comparing the two cases handled by the supreme people’s court,this part points out that there are inconsistent trial logic and identification standard in the trial practice of corporate opportunity cases.Secondly,this part makes a statistical analysis of the existing cases on China Judgement Online,and points out that these two problems are not rare that only exist in the cases introduced in chapter one,but prominent and common in domestic judgment.Later this part analyzes the cause of the problems.Chapter three,the clarification of judgment logic.In this chapter,by examining the trial logic of the courts of common law countries,this paper concludes that the domestic courts should learn from the United States,which is under the ownership approach.Secondly,this chapter points out that the domestic understanding of the rules of corporate opportunity is biased by comparing the American practice with the domestic practice.After determining that the business opportunity belongs to the company,domestic courts will determine whether it constitutes a usurpation by analyzing the way of act in addition to the US logic.This paper thinks there is no need to analyze the behavior of the executive directors,and the domestic court shall adopt the exceptions to determining whether directors and executives can take advantage of the opportunity.Therefore the trial logic is first decide whether business opportunities belong to the company first,then deciding whether the case is one of the exceptions in which directors and executives can take advantage of the company.Chapter four,reconstruction of judging rules.According to the judicial logic determined in chapter 3,chapter 4 is divided into two sections,which respectively discuss the identification of corporate opportunities and the exceptions against the usurpation of corporate opportunities.This chapter first introduces corporate opportunity identification standards in the American case law,legal restatement and some main theories in the theoretical field.By analyzing the development of the American standard,it makes clear that the corporate opportunity cannot be defined abstractly,and the ownership of the business opportunity should be analyzed based on some specific factors.On this basis,several common factors considered by domestic courts and academic circles are analyzed and selected to reconstruct the standard to identify corporate opportunities.Then this part adopts a comparative analysis to several exceptions that discussed by theoretical circle,and holds that only in the condition that the company permit the use can the director or executive take advantage of the corporate opportunity.