Business integrity v. business efficiency: the corporate opportunity doctrine in China

Author:Fang Ma
Position:School of Law, University of Portsmouth, Portsmouth, United Kingdom
Pages:201-215
SUMMARY

Purpose - The purpose of this paper is to assess the application of the nascent corporate opportunity doctrine in China by comparison with its well-established English counterpart; in particular, it evaluates whether the fine balance between business integrity and business efficiency has been struck. Findings - It is argued that the... (see full summary)

 
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Business integrity v. business
efciency: the corporate
opportunity doctrine in China
Fang Ma
School of Law, University of Portsmouth, Portsmouth, UK
Abstract
Purpose – The purpose of this paper is to assess the application of the nascent corporate opportunity
doctrine in China by comparison with its well-established English counterpart; in particular, it
evaluates whether the ne balance between business integrity and business efciency has been struck.
Findings – It is argued that the scope of application of the corporate opportunity doctrine in China
should be extended, and the rules on the burden of proof should be amended. Moreover, a stricter
approach should be adopted by the Chinese judiciary for the purpose of protecting the company’s
interests and enhancing business integrity.
Research limitations/implications This paper mainly focuses on the corporate opportunity
doctrine. It does not discuss other duties of directors in detail.
Practical implications It is useful for directors in balancing business integrity and business
efciency.
Originality/value – It is an original piece of work which assesses the corporate opportunity doctrine
by making comparison with English law.
Keywords Corporate opportunity doctrine, Director’s duties in China
Paper type Research paper
1. Introduction
The corporate opportunity doctrine has existed in the UK for a long period of time at
common law, and it is now codied in the Companies Act 2006 (the “CA2006”). By
contrast, this doctrine was rst introduced into China under the Chinese Company Law
2005 (the “CCL 2005”)[1] as one of the duciary duties imposed on directors and senior
managers of a company. Article 149 (5) of the CCL 2005 provides that:
Directors and senior managers, without the approval of shareholder meeting, must not take
advantage of their positions to acquire business opportunities for themselves or any other
person, or to engage in business identical to the company’s business for the benet of
themselves or any other person.
It aims to prevent directors and senior managers from taking advantage of the
company’s opportunities and information unless it is approved by the shareholder
meeting.
The current rules under the CCL 2005 provide very basic legal framework; for
instance, they only apply to directors and senior managers; supervisors and
controlling shareholders are excluded. Moreover, the approval of shareholder
meeting, instead of the board of directors, is required for the use of corporate
opportunities. The process for obtaining approval is long, cumbersome and
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
Business
integrity v.
business
efciency
201
Journalof Financial Crime
Vol.23 No. 1, 2016
pp.201-215
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-05-2014-0025

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