On Directors’ liability to Call for Capital Contributions

DOI: https://doi.org/10.62517/jel.202514306

Author(s)

Ying Liu*

Affiliation(s)

China Jiliang University, Hangzhou, Zhejiang, China *Corresponding Author

Abstract

The newly amended Company Law of China in 2023 has increased the obligation of directors to call for contributions from shareholders and stipulated the responsibility of directors to call for contributions, but there are still ambiguities about the nature of the responsibility, its determination, and the way of assuming it. Therefore, it is of great significance to clarify the issues related to the legal responsibility of directors' failure to call for capital contribution obligation for the improvement of company law and optimization of corporate governance. This study uses case empirical research method, literature analysis method and other methods, combined with relevant theoretical argumentation support, to explore the nature of the director's responsibility in the call for capital contribution, the assumption of the way, the scope and the determination of the standard issues. The director's duty for capital call should be characterized as a tort liability rather than a breach of contract liability. In the determination of liability, the director's duties, subjective fault, and business judgment rules should be taken into account to determine the "liable director". In the determination of causality, the principle of equivalent causality should be adopted, and the distinction between the ability of shareholders to make contributions and the directors' fulfillment of the obligation to call for contributions. Liability should be assumed in the form of supplementary liability, and the scope of liability should be determined proportionally according to the degree of causality of the director's behavior to the loss. The above findings can provide a realistic reference for improving the capital call system.

Keywords

Capital Call System; Directors' Liability; Liability Determination; Duty of Diligence; Scope of Liability

References

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