Research On The System Of Civil Liability Reduction And Exemption For Independent Directors

The design purpose of China’s independent director system is to supervise the major shareholders or actual controllers of listed companies and protect the rights and interests of small and medium-sized shareholders.In terms of legislation,the overall connotation and responsibility system of director obligations in China are still under construction,and there is no clear distinction between independent directors and internal directors.Among them,the accountability of independent directors for violating their duty of diligence is mostly achieved through administrative responsibility,and there are fewer civil liability related cases.In recent years,with the improvement of the director liability regulation system,there has been an increase in cases where independent directors bear civil liability for violating their duty of diligence.The lack of relevant obligation norms and judicial rules has led to the risk of imbalance in the civil liability of independent directors in judicial practice.The verdict in the 2021 Kangmei Pharmaceutical case further highlighted the seriousness of this issue.By reviewing the current regulations on the reduction and exemption of liability for independent directors and analyzing relevant typical cases,it was found that some courts believe that independent directors should have supervisory skills similar to experts and a high degree of diligence in performing their duties,and did not distinguish and reason between independent directors and internal directors when determining fault;Some courts have taken into account the heterogeneity in the scope of responsibilities,level of understanding of company information,and level of professionalism between independent directors and internal directors.However,there are differences in understanding the nature of the fault of independent directors and the size of their responsibilities.Some courts have adopted the principle of fairness to reduce the liability of independent directors under clear legal rules.Overall,there are deficiencies in the mechanism for reducing the civil liability of independent directors,such as unclear liability boundaries for independent directors,insufficient supply of the system for reducing civil liability of independent directors,and ineffective director liability insurance.In response to the problems in the recognition and reduction of civil liability of independent directors in legislation and judicial practice,by organizing existing research results and combining with relevant liability reduction mechanisms outside the region.Attempt to propose three specific suggestions: firstly,clarify the civil liability boundary of independent directors.The second is to establish a prior exemption mechanism for independent directors through articles of association,and introduce commercial judgment rules in the Company Law to increase the supply of civil liability reduction and exemption system for independent directors.The third is to accelerate the development of the independent director liability insurance system.