Classic case

A certain heating company sued my client, claiming that during my tenure as a director and general manager of the company, my client violated the diligent and faithful obligations of directors and executives as stipulated by the Company Law, causing huge losses to the company. Therefore, I am seeking compensation of nearly 20 million yuan from the client. After accepting the client's commission, under the leadership of Director Liu Gangming, I appointed Lawyer Zhang Wangwang, a senior expert in the field of company law, as my litigation agent, and with the concerted efforts of Rainbow's core legal team, I argued with reason. The case went through first and second trials, and the claims of the heating company were not supported by the court. Our side achieved a perfect victory. (Judgment attached at the end of the text)

01

The plaintiff claims

My client has served as a director and general manager of the heating company, responsible for the daily affairs of the company. A few years ago, as a senior executive of the company, the client failed to conduct due diligence and evaluation on three sub projects in Beijing's investment projects, resulting in a loss of 8 million yuan after the acquisition of project 1, unjustified additional expenses of 2 million yuan for project 2, and additional compensation of 5 million yuan for project 3. In addition, the principal took advantage of their position to transfer company assets through affiliated companies, causing losses to the company.

key word

Corporate litigation, damage to company interests, duty of diligence and loyalty

02

Case analysis

The focus of the dispute in this case is whether the principal has violated the obligations of loyalty and diligence during his tenure as a director or executive of the heating company, causing losses to the company.

Article 147 of the Company Law stipulates that directors, supervisors, and senior management personnel shall comply with laws, administrative regulations, and the company's articles of association, and shall have a duty of loyalty and diligence towards the company. Directors, supervisors, and senior management personnel shall not use their powers to accept bribes or other illegal income, nor shall they embezzle company property. Article 149 stipulates that if directors, supervisors, or senior management personnel violate laws, administrative regulations, or the company's articles of association while performing their duties and cause losses to the company, they shall be liable for compensation.

The key to determining whether a company's directors or executives have violated their duty of diligence is to judge whether they have reasonably performed their duties. The scope of their duties should be reviewed through the company's articles of association or other rules and regulations, and the specific content of their duty of diligence should be determined. Then, the behavior of the directors or executives should be examined to determine whether they have violated their duties and caused losses to the company, in order to determine whether they should bear compensation liability. Firstly, in this case, the basis for determining the responsibilities of the principal as a director and general manager of the company is the evidence submitted by both parties, which is the "General Manager's Work Rules". However, this work rule does not specify that the general manager must complete due diligence and evaluation procedures for specific projects' external investments. Secondly, based on multiple resolutions of the shareholders' meeting, it is sufficient to confirm that the board of directors and shareholders' meeting of the plaintiff company are aware of and agree to the proposed acquisition of the Beijing project by the aforementioned company. Finally, there is insufficient evidence to prove the causal relationship between the actual losses suffered by the relevant projects and the performance of the client's duties.

To determine whether a company's directors or executives have violated their duty of loyalty, it is necessary to examine whether they have engaged in any behavior that harms the interests of the company. The plaintiff's heating company claims that the principal violated the duty of loyalty and embezzled company funds, based on the fact that the principal's affiliated company transferred the payment received from the plaintiff's company. However, the plaintiff has no evidence to prove that this payment is a loss to the company. After court investigation, it was found that there were multiple contracts and clear creditor debtor relationships between the plaintiff and the client's affiliated companies, which led to multiple lawsuits. In a separate lawsuit, the plaintiff explicitly proposed to offset the outstanding debt with the advance payment. Therefore, this amount does not belong to the plaintiff's loss.

03

Significance of the case

The company has independent property and assumes independent responsibility for external affairs. The company is an independent subject of civil legal relations. The Company Law stipulates that company directors and executives have a duty of loyalty, aimed at regulating conflicts of interest between the company and directors and executives, clarifying that directors and executives shall not prioritize personal interests over company interests, nor sacrifice company interests to pursue personal interests. Directors and executives have a duty of diligence, requiring them to manage company affairs diligently and prudently, to perform their duties with the same care, diligence, and skill as a reasonable and prudent person in similar circumstances, to strive for the maximum benefit of the company, and to take reasonable measures to prevent damage to the company's interests. The income of directors and executives who violate their duty of loyalty shall be attributed to the company. If they violate the provisions of laws, administrative regulations or the company's articles of association and cause losses to the company, they shall be compensated. If a shareholder of a company engages in behavior that harms the interests of the company and causes losses to the company, the company may initiate a lawsuit in its own name against the shareholder as the defendant. However, in order for the company to win the lawsuit, it not only needs sufficient evidence to prove that the shareholders have committed acts that have infringed upon the company's interests, but also to prove that the company has suffered actual losses and that there is a causal relationship between the losses and the infringing acts.

Since the day when I signed the agency agreement with the client, the Rainbow legal team has embarked on the path of upholding fairness and justice in the rule of law. Under the leadership of Director Liu Gangming, they have conducted multiple on-site investigations and evidence collection, carefully analyzed and studied the evidence materials collected from all parties, and researched a large number of judicial cases, laws and regulations to sort out the context of the cases and strengthen their logical connections. The case is complex, with multiple rounds of evidence exchange and pre-trial meetings before the court hearing, as well as first and second trials. The time is long, and the Rainbow legal team has overcome the difficulties together. At the trial, Lawyer Zhang Wangwang also argued with reason and engaged in a verbal battle

一审判决书

二审判决书