THE DUTY OF LOYALTY OF COMPANY DIRECTORS IN CHINA: TRACING ITS ORIGINS AND PLUGGING THE GAPS.

The duty of loyalty is a core duty under the legal framework for directors' duties. The concept as borrowed by China originates from the UK and has further developed into many variations across common law jurisdictions. The different legal environments and development history lead to divergences in elaborating the duty in common law jurisdictions. The divergences can provide useful references for countries that have adopted and intend to improve the duty so as to enrich the content of the duty and plug any gaps. Chinese company law is still struggling to deal with the abstract nature of the duty, its scope of application and the test to apply in determining whether it has been breached. In practice, the Chinese judiciary is attempting to understand the duty. Nonetheless, their efforts are not entirely successful because the law omits several core aspects of the duty: the test for determining whether the duty has been breached, the ability to contract out of the duty and an applicable definition or understanding of a conflict of interest. The common law literature can be used as a starting point to sketch out a reasonable structure for the design of a better duty of loyalty in China. [ABSTRACT FROM AUTHOR]