Research On Independent Director Civil Liability System

China has introduced the independent director system since the 1990 s,which has played a positive role in improving the governance level of listed companies.However,there are still problems in determining the civil liability of independent directors in China.Regarding the legal liability of independent directors,based on the Company Law and the Securities Law,Judicial interpretations,departmental rules,normative documents and industry self-discipline rules of exchanges and associations of listed companies,such as the Supreme People’s Court’s Judicial Interpretation on the Trial of False Statements in the Securities Market,Opinions on the Reform of the System of Quasi-independent Directors of Listed Companies and Measures for the Administration of Independent Directors of Listed Companies,are supplemented to form a three-level legal system of laws,departmental rules and self-discipline rules,which constitutes a normative system covering civil liability and administrative liability.This paper starts with the theoretical basis of the independent director system and aims at the related issues of civil liability of independent directors.The most important characteristic of independent directors is their independence.In addition to the general functions and powers of directors,they also enjoy the special functions and powers of independent directors.However,Chinese laws and regulations only add responsibilities to independent directors from the perspective of responsibilities,but the relevant provisions on their civil liability are scattered.At present,when the judicial practice determines the civil liability of independent directors,it is usually based on their signing or voting in favor of the report of illegal information disclosure as the basis for determining whether they are diligent and responsible.Courts generally judge independent directors to bear joint and several liability for the losses caused by false statements to investors by means of proportional liability.The Kangmei Pharmaceutical case is the first special representative action in the false statement of securities in China.There are a large number of investors and the amount of loss is high,and the amount of compensation undertaken by the independent director is huge,which leads to the independent director facing the risk of civil liability that does not match with his performance interests.With the advent of the era of strong responsibility of independent directors,the independent director system is still not complete,the independent director liability protection mechanism is not perfect,the lack of refined civil liability identification standards,independent directors are faced with excessive civil compensation liability and the mismatch of rights,responsibilities and interests and other problems.Japan’s restriction and exemption of independent directors’ liability is only applicable to subjective acts without intention and gross negligence,and the conditions and procedures for restricting and exempting their liability are clearly stipulated in legislation.The Japanese commercial law restricts the liability of independent directors in the following ways: limiting or exempting the liability of independent directors through resolutions of shareholders’ general meeting;Restriction or exemption by resolution of the board of directors;Independent directors are allowed to sign a limited liability contract with the company.The principle of "business judgment rule" is gradually applied in judicial practice in the United States,and American law stipulates that the civil liability of independent directors can be reduced or exempted by means of articles of association,setting the upper limit of compensation,establishing compensation system and director liability insurance system.Although the national conditions of different countries are different,the regulations on the limitation and exemption of independent directors’ liability abroad can provide relevant reference for China,and China can localize the system in light of the national conditions.After analyzing the civil liability system of independent directors,corresponding improvements should be made at the level of system design and implementation.First of all,the legal positioning of independent directors as supervisors should be adhered to,the recognition of diligence and responsibility should be returned from consequentialism to proceduralism,and the accountability standards for independent directors violating the duty of diligence should be clarified,so as to balance leniency and severity with power and responsibility.Secondly,we should improve the civil liability protection mechanism of independent directors,implement and improve the director liability insurance system,and protect independent directors against the risk of civil compensation.Improve the independent directors’ reasonable trust interest protection,and appropriate introduction of business judgment rules;The amount of civil compensation for independent directors shall be limited,and independent directors with good faith and no gross negligence in performing their duties shall be liable to the extent of the total compensation they receive within a fixed period.Finally,we can appropriately learn from overseas experience,increase the voluntary exemption measures of the company,allow the constitution to make restrictive provisions on the civil liability of independent directors,and allow the general meeting of shareholders to reduce their civil liability by resolution.By improving the civil liability mechanism of the independent director,we hope to not only safeguard the interests of the company and shareholders,but also strengthen the performance guarantee of the independent director,encourage excellent and diligent independent directors to enter the market,and thus give full play to the advantages of the independent director system.