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Trends and Development of the Directors’ Duty of Loyalty in China: A Case Analysis

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  • Shuangge Wen

    (Centre for Jurisprudence Research, School of Law, Jilin University, Changchun 130012, China
    Institute of International Shipping and Trade Law, Swansea University, Swansea SA2 8PP, UK)

  • Jingchen Zhao

    (Centre of Corporate and Insolvency Law, Nottingham Law School, Nottingham Trent University, Nottingham NG1 4FQ, UK
    School of Law, Guangdong University of Finance & Economics, Guangzhou 510320, China)

Abstract

Covering a central theme in corporate law development, this paper discusses the pragmatic utility of the common-law-originated duty of loyalty of company directors in the civil law context of China. The reception of legal transplantation in a host environment remains a contentious theme, and it seems to be an opportune time to study relevant cases that have been adjudicated since China’s statutory inauguration of the directors’ duty of loyalty in 2005, in the sense that more than 10 years of practice has resulted in ample evidence on the practical effects of this transplanted duty. Through an analysis of 526 cases on the basis of eight attributes, we discovered some commendable features, including increasing accessibility of the law and a differentiation of various types of directors’ duties of loyalty. Meanwhile, the selective adoption norm customary to Chinese culture has to a certain extent compromised the intended goals of greater legislative clarity, judicial consistency and in turn balanced and sustainable businesses, demonstrated in several incompatibilities between transplanted duties and domestic legal institutions. Reshaping the conventional transplantation ideal that commercial laws are easily transferable, the paper suggests the construction of a broad collateral regime for greater congruence between laws and existing institutions.

Suggested Citation

  • Shuangge Wen & Jingchen Zhao, 2021. "Trends and Development of the Directors’ Duty of Loyalty in China: A Case Analysis," Sustainability, MDPI, vol. 13(15), pages 1-27, August.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:15:p:8589-:d:606713
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    3. Henry Hansmann & Reinier Kraakman, 2000. "The End Of History For Corporate Law," Yale School of Management Working Papers ysm136, Yale School of Management, revised 01 Feb 2001.
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