Directors’ Duties in China

Abstract

This paper examines the development of the legal framework regarding fiduciary duties of directors in China. The concept of fiduciary duty was introduced by the 2005 revisions to China’s Corporate Law. The implementation of fiduciary duties in China has encountered considerable obstacles because of the inherent weakness of the legal system. The legal texts are simple, vague and rigid. In the enforcement process, formalized judgments have placed limitations on precedent creation, thus reducing the deterrent effect, and the judicial system has shown reluctance to intervene in matters related to directors’ duties in listed companies. There have been improvements, however. In a limited number of judicial decisions, courts have attempted to more clearly define the meaning of directors’ fiduciary duties. In the penalty decisions of the China Securities Regulatory Commission (CSRC), the duties of directors have been interpreted in a more sophisticated manner.

Keywords: fiduciary duties, China, corporate law, courts, securities authorities

JEL Classification: K22