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Research on the Framework of the Directors and Officers’ Liability Insurance of China

Author: JieXueWen
Tutor: LiWeiQun
School: East China University of Political Science
Course: Legal
Keywords: Directors Liability Insurance Conflict Reconciliation Design Concept of Directors Insurance System
CLC: D922.287
Type: Master's thesis
Year: 2011
Downloads: 71
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Abstract

The value of the directors’liability insurance includes many aspects: (1). Help to protect the innocent directors and senior management against the improper claims; (2). Inspire the people who have the ability to occupy the position as directors and senior management. (3). Prevent the unreasonable lawsuits of shareholders. Incentives are the most important value for the directors’liability insurance. Modern company law strengthens the company’s personal responsibility to improve the corporate governance structure. In modern society, the people who occupied the position of the company’s management face enormous risk of litigation. So the people will be reluctant to serve as a director and senior management in the company if there is no effective incentive mechanism. The directors’liability insurance provides an effective protection for the company’s professional operators off the risk. The company purchase liability insurance for director, not only can encourage directors and senior management to work hard, but create more benefits for the company. In the developed countries of Europe and America, the vast majority listed companies purchased the liability insurance for the directors. In china, the provisions and regulations on the directors and senior management of the company law and securities law are not clear, so the risk of personal legal liability to the directors and senior management is little. Even in the case like Zhengbaiwen, Guangxia and Daqing networking, the directors and the senior management didn’t have civil liability. Therefore, in our country, the need of the directors’liability insurance is not big and the study on it is not enough. From above, that is why in this paper the writer attempts to study the director liability insurance system by focusing on the conflict and opposition between the existing legal systems and the director liability insurance system. The writer try to proposal a number of recommendation for establish a sound and reasonable structure of the director liability insurance system in china by analyzing the problems.This article is divided into four parts. The first part introduces the definition of liability insurance for directors and its development .the insured persons of the directors’liability insurance contract and its legal risk.The second part analyzed the conflict between the existing legal system and the directors’liability insurance. Mainly including: First, the director liability insurance, the liability of directors be transferred to the Insurance Company, and the corresponding reduced the liability of individual directors. Thus, resulting in conflict between the function of transfer of the directors liability insurance in director liability and the function of inhibition of violations of civil liability theory, Second, the Corporation law does not specify how to measure the performance of duty of care standards and does not list the case of breach of duty of the directors, the legal consequences is also not included when breach the duty of care provisions. Third, the liabilities range is not consistent between directors’liability insurance for directors’liability resulting from negligent acts and the existing "Securities law" requirements. The fault behavior of directors, including gross negligence, general negligence, directors liability insurance coverage is only the general fault. For gross negligence, the insurance company is not insured.The third part, try to discuss the legal system in order to reconcile the conflict, First, the design director of civil liability, civil liability system to take into account the illegal suppression and directors liability insurance system. Directors must reconcile the conflict of civil liability insurance and liability insurance for directors. Directors should be covered only civil liability for negligence, for the directors of the offense, is not covered. Second, the subsequence of Corporation Law, the proposed regulations in detail how to define the duty of care of directors, which is the most thorough method. At present may suggest the company in the Articles of Association take provisions of duty of care about the directors of the company. Third, the proposed changes after the "Securities Law" is to define the presumption of fault so as can distinguish ordinary negligence and gross negligence. Liability insurance should be include the civil liability result from the director general negligence Or, the terms of liability insurance for directors should be include special provisions. for liability insurance for directors violated the Securities law list what actions led to compensation of directors violated the Securities and what actions will not be compensated.The fourth part is the proposals of the directors’liability insurance: First, to expand coverage. The development of China’s current liability insurance for directors at the initial stage, it should be appropriate to expand coverage, should include the liability of directors’gross negligence. Only on the basis of reality and change its coverage can attract the market demand, development director liability insurance. Second, to define the excepted circumstance. Directors of insurance companies to provide liability insurance in the general contract, breach of misconduct, fraud, willful malicious acts, and acts of violation of the law, are all the exception circumstances, in any case, the exception circumstances are not underwriting. Third, the introduction of limits of liability, the proportion of deductible provisions and premiums paid. Fourth. the principle of utmost good faith in insurance law is to require the insured person has this obligation to notify. Insurance companies are obliged to detail to the insured the content and meaning of insurance terms, in particular, it should be detail in the insurance terms, the except liability insurer, and the obligation to inform the insured, notification obligations and so on. Fifth, the introduction of the corporation compensation system. The corporate compensation system can provide some financial support for directors and senior management when they bear personal liability,

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CLC: > Political, legal > Legal > Chinese law > Financial Law > Securities and Management Act
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