On The Limitation And Exemption Of Civil Compensation Liability Of Independent Directors In China

In the case of Kangmei Pharmaceutical Co.,Ltd.,five independent directors were jointly and severally liable for hundreds of millions of yuan due to their failure to do their due diligence,highlighting the imbalance between the income and risk of independent directors.The legal risk of independent directors ’ civil compensation liability is too large,triggering the ’ chilling effect ’ of the independent director system.How to balance the relationship between the rights,obligations and responsibilities of independent directors and make them more scientific and effective is the key to improve the independent director system.At present,China ’s law does not make special provisions on the issue of independent directors ’ civil liability for compensation.It can only summarize the application of Article 85 of the ’ Securities Law ’,that is,as a member of the directors,the civil compensation for securities false statement infringement and the issuer shall bear joint and several liability for compensation,applying the principle of presumption of fault.On January 21,2022,the Supreme People ’s Court issued ’ Several Provisions on the Trial of Civil Compensation Cases of False Statement Infringement in Securities Markets ’,which innovatively stipulated the grounds for the diligence defense of independent directors,but there are still many disputes in practice.In judicial practice,the civil liability of independent directors has a trend from supplementary liability to proportional joint liability,but there is no limit on the amount of compensation.In general,at present,the system of limitation and exemption of civil liability for independent directors in China is still in a state of inadequacy or absence.The main reason is that the functional orientation of independent directors in China is vague,independent directors are expected to be unreasonable ’all-round directors ’,bear joint and several liability with ordinary directors,and do not set the upper limit of compensation.The criteria for judging the diligence obligation of independent directors are not clear,and it is very difficult to exempt liability through reasonable diligence defense.For the construction of the civil compensation liability limitation and exemption system for independent directors in China,it is first necessary to clarify that independent directors should be the supervisor of "limited function and limited liability," and distinguish the difference between independent directors and ordinary directors.Secondly,on the basis of clarifying the function orientation of independent directors,independent directors should bear individual responsibilities within the proportional range according to their own faults,and limit the amount of compensation,so as to avoid the amount of compensation that is completely inconsistent with the salary level and ability to pay of the parties in the case of Kangmei Pharmaceutical Co.,Ltd.This paper suggests that the maximum amount of compensation should be twice the total amount of compensation received by all the companies since the independent directors took up the position of independent directors.At the same time,the company ’s articles of association are authorized by law to directly stipulate the scope and scope of the liability limitation of independent directors,or the company signs a liability limitation contract with independent directors in advance to achieve the combination of legal regulation and respect for corporate autonomy.And further improve China ’s independent director liability insurance mechanism,as an independent director liability limit exemption mechanism supporting measures.Once again,the objective judgment criteria of the duty of diligence should be clarified,and the business judgment rules should be introduced to further ensure that independent directors do not bear civil liability for general negligence.Finally,in view of the dilemma that it is difficult for independent directors to defend diligently in judicial practice,we should broaden the path of independent directors’ diligent defense,give full play to the role of court investigation and evidence collection,and make a comprehensive and in-depth comprehensive analysis and judgment on whether independent directors are diligent and dutiful in combination with the considerations stipulated in the law,defenses,and the performance of independent directors,so as to achieve the balance of interests in the allocation of powers and responsibilities of market participants.