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What Are the Directors' Duties

Updated:2021-10-27 18:46:30    Source:www.tannet-group.comViews:309

The law of mainland China does not have a concept of ‘fiduciary’ duties as they are generally understood in common law jurisdictions.

The duties expressly owed by a director of a company under the Company Law are the duty of loyalty and the duty of diligence. The duty of loyalty is not expressly defined, but is generally understood to require a director to perform his or her position so as to avoid conflicts of interest and to protect and act in the best interests of, and for the benefit of, the company. The duty of diligence is also not expressly defined, but is generally understood to require a director
to exercise due care and to protect the interests of the company.
Directors are also expressly prohibited from certain acts which may cause them to act contrary to their duties of loyalty and
diligence to the company.Although these duties appear somewhat
similar to the fiduciary duties of a director under common law, they are not exactly the same and should not be equated.

Companies in mainland China are generally required to establish a supervisory board, which cannot have less than three members. Companies with a comparatively small number of shareholders, or which are comparatively small in scale, may have one to two supervisors rather than a supervisory board. The members of the supervisory board
must include representatives of the shareholders and an appropriate proportion of representatives of the company’s employees (not less than one-third of the total number of members on the supervisory board with the specific proportion being provided for in the company’s articles of association). Directors and senior management personnel may not concurrently serve as supervisors.

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