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1.Study and describe the Best Practice Rules of the Dutch Corporate Governance Code concerning conflict of interest
Best Practice Rules come from the UK corporate governance,which could prevent the worst cases of abuse of rights in company law.Best Practice Rule also has the advantage to blur the sharp edges between ordinary ethics and laws,as it lifts some of the ethical requirements “up” to the level of law[1]. The Best Practice Provisions in Dutch Corporate Governance Code which creat a set of standards governing the conduct of management board members,supervisory board members and the shareholders,which reflect national and international best practice and may be regarded as the general principle of good corporate governance.But when conflict of interests occured,listed company with justified reasons may depart from the best practice provision then the company should also state each year in its annual report how it applied the principles and best practice provision and why a best practice provison was not applied.[2]We can describe the Best Practice Rules of the Dutch Corporate Governance Code concerning conflict of interest into two parts as follows:
1.1Best Practice Rules concerning conflict of interest about the Management Board
The management board members have a duty of loyalty to keep the fairness of competition ,to avoid conflict of interst between company and management board members and aslo include people who have kinships with them under Dutch law.[3]When a conflict of interest or potential conflict of interest that is of material significance to the company appears,the management board member shall report to the chariman of the supervisory board and other management board members,provide all the necessary information ,then the supervisory board decide without the concerned management board members being present ,whether there is a conflict of interes. [4]All transactions in which there are conflicts of interest with management board members shall be agreed on terms that are customary in the sector concerned and material significant conflict of interest of the management board members with the company require the approval of the supervisory board, such transaction shall be published in the annual report including a statement of the conflict of interest and a declaration that best practice provision II.3.2 to II.3.4 have been complied with.[5]
1.2Best Practice Rules concerning conflict of interest about the Supervisory Board
The supervisory board members have the duty to report imediately to the chairman of the supervisory board when conflict of interest or potential conflict of interest with material significance to the company/or to him occurs;to provide all the necessary informations;when the conflict of interests as mementioned above happens to the chairman of the supervisory board,he should follow the above report procedures to the vice-chairman;the supervisory board make the assement whether there is a conflict of interest without the concerned supervisory board member being present.[6]Decisions to enter into the transactions in which there are conflicts of interest as mentioned above requiring the approval of the supervisory board; such transactions should be published in the annual report, together with the statement of conflict of interest and a declaration that best practice provisions III.6.1 to III.6.3 have been complied with.[7] Decisions to enter into the transactions which there are conflict of interest between the company and legal or natural person who hold at least ten percent of the shares in the company, requiring the approval of the supervisory board;this transaction shall be published in the annual report ,together with a declaration that best practice provision III.6.4 has been observed.[8]The terms of reference of the supervisory board shall include rules in dealing with conflict of interest and potential conflict of interest between management board members, supervisory board members and the external auditor on the one hand ,the company on the other hand; shall stipulate which transaction need the approval of the supervisory board.[9] A delegated supervisory board member is a member of supervisory board who has special duty and may not extend beyond the duties of delegation.[10]If there are some vacancies among the management board members and a supervisory board member temporarily takes on the management job of the company, he shall resign from the supervisory board to avoid conflict of interest. [11]
2.Then compare the Best Practice Rules about conflict of interest to art. 2:256 of the Dutch Civil Code
According to the Dutch Civil Code article.2:256 ,we can conclude that when there is a conflict of interest between the company and its directors, the company shall be represented by the supervisory directors, the general meeting always have authority to appoint one or more other persons for this purpose. But there are some exceptions to the Best Practice Rules where the article of association may provide otherwise provision. The articles of association of a company may contain a provision from which the lack of representative authority of directors in the event of a conflict of interests is "removed" and it can also provide that even in cases where directors have a conflict of interests with the company, they are still authorized to represent the company. Internally, the board of directors remains obliged to inform the general meeting in good time if a conflict of interest arises, as allows the general meeting to appoint another representative, or to decide not to do so. Like what we discussed in Question 1 when conflict of interest happens, the concerned person has a duty to report to the relevant organ at once, the company has the option to comply or not comply the best practice provision and followed a series of procedures. The Dutch Corporate Governance Code provide more detail regulations than the Dutch Civil Code.
3.Then compare the Best Practice Rules about conflict of interest of your own country
In China , the Best Practice Rules about conflict of interest in company law can be summarized as follows: the management board members, the supervisory board members and senior managers have the fiduciary and deligent duties to avoid conflit of interest, they shall not abuse the right to injure the interest of creditors and company, if they abuse the right and cause the damages they have to do compensation[12].Company should not lend money or provide guarantee to any of its directors,supervisors and senior managers,should not accept bribe or illegal gains by taking the advantages of his authority ,but if there are some exceptions in the articles of association and these people get the approval of the shareholder`s meeting or the general meeing or management board they are not forced to follow the best pracrice provisions. [13]For example, according to the articles of association and the approval of shareholder`s meeting or general meeting ,the company may provide guarantee and lend money for the shareholders or the actual controllers,but the concerned person could not join thevoting about this decision.Such as ,if the directors or the supervisors follow the articles of association and get approval of the shareholder`s meeting or general meeting they may enter into the contract and do trasanctions with the company;they may do the same or similar business as the company which they severed for.[14]
Different from other countries, we have some special regulations about the best practice rules about conflict of interest of the state-owned companies. According to Article 70 of the Company Law of the People `s Republic of China, none of the chairman, vice-chairman, directors and senior managers of a solely state-owned company may concurrently hold a post in any other companies or economic organizations, unless they get the approval of the state-owned assets supervision and administration institution.■
【References】
［１］Best Company Practice—A Duty of Loyalty for the Purpose of Preventing Abuse of Powers Under Company Law.
［２］See Preamble of The Dutch Corporate Governance.
［３］See II.3.1 of The Dutch Corporate Governance.
［４］See II.3.2 and II.3.3 of The Dutch Corporate Governance.
［５］See II.3.4 of The Dutch Corporate Governance.
［６］See III.6.1 and III.6.2 of The Dutch Corporate Governance.
［７］See III.6.3 of The Dutch Corporate Governance.
［８］See III.6.4 of The Dutch Corporate Governance.
［９］See III.6.5 of The Dutch Corporate Governance.
［１０］See III.6.6 of The Dutch Corporate Governance.
［１１］See III.6.7 of The Dutch Corporate Governance.
［１２］See Article 20 and Article 148 of The Company Law of the People’s Republic of China.
［１３］See Article 116 and Article 148,149 of The Company Law of the People’s Republic of China.
［１４］See Article 149(3),(4),(5) of The Company Law of the People’s Republic of China.
Best Practice Rules come from the UK corporate governance,which could prevent the worst cases of abuse of rights in company law.Best Practice Rule also has the advantage to blur the sharp edges between ordinary ethics and laws,as it lifts some of the ethical requirements “up” to the level of law[1]. The Best Practice Provisions in Dutch Corporate Governance Code which creat a set of standards governing the conduct of management board members,supervisory board members and the shareholders,which reflect national and international best practice and may be regarded as the general principle of good corporate governance.But when conflict of interests occured,listed company with justified reasons may depart from the best practice provision then the company should also state each year in its annual report how it applied the principles and best practice provision and why a best practice provison was not applied.[2]We can describe the Best Practice Rules of the Dutch Corporate Governance Code concerning conflict of interest into two parts as follows:
1.1Best Practice Rules concerning conflict of interest about the Management Board
The management board members have a duty of loyalty to keep the fairness of competition ,to avoid conflict of interst between company and management board members and aslo include people who have kinships with them under Dutch law.[3]When a conflict of interest or potential conflict of interest that is of material significance to the company appears,the management board member shall report to the chariman of the supervisory board and other management board members,provide all the necessary information ,then the supervisory board decide without the concerned management board members being present ,whether there is a conflict of interes. [4]All transactions in which there are conflicts of interest with management board members shall be agreed on terms that are customary in the sector concerned and material significant conflict of interest of the management board members with the company require the approval of the supervisory board, such transaction shall be published in the annual report including a statement of the conflict of interest and a declaration that best practice provision II.3.2 to II.3.4 have been complied with.[5]
1.2Best Practice Rules concerning conflict of interest about the Supervisory Board
The supervisory board members have the duty to report imediately to the chairman of the supervisory board when conflict of interest or potential conflict of interest with material significance to the company/or to him occurs;to provide all the necessary informations;when the conflict of interests as mementioned above happens to the chairman of the supervisory board,he should follow the above report procedures to the vice-chairman;the supervisory board make the assement whether there is a conflict of interest without the concerned supervisory board member being present.[6]Decisions to enter into the transactions in which there are conflicts of interest as mentioned above requiring the approval of the supervisory board; such transactions should be published in the annual report, together with the statement of conflict of interest and a declaration that best practice provisions III.6.1 to III.6.3 have been complied with.[7] Decisions to enter into the transactions which there are conflict of interest between the company and legal or natural person who hold at least ten percent of the shares in the company, requiring the approval of the supervisory board;this transaction shall be published in the annual report ,together with a declaration that best practice provision III.6.4 has been observed.[8]The terms of reference of the supervisory board shall include rules in dealing with conflict of interest and potential conflict of interest between management board members, supervisory board members and the external auditor on the one hand ,the company on the other hand; shall stipulate which transaction need the approval of the supervisory board.[9] A delegated supervisory board member is a member of supervisory board who has special duty and may not extend beyond the duties of delegation.[10]If there are some vacancies among the management board members and a supervisory board member temporarily takes on the management job of the company, he shall resign from the supervisory board to avoid conflict of interest. [11]
2.Then compare the Best Practice Rules about conflict of interest to art. 2:256 of the Dutch Civil Code
According to the Dutch Civil Code article.2:256 ,we can conclude that when there is a conflict of interest between the company and its directors, the company shall be represented by the supervisory directors, the general meeting always have authority to appoint one or more other persons for this purpose. But there are some exceptions to the Best Practice Rules where the article of association may provide otherwise provision. The articles of association of a company may contain a provision from which the lack of representative authority of directors in the event of a conflict of interests is "removed" and it can also provide that even in cases where directors have a conflict of interests with the company, they are still authorized to represent the company. Internally, the board of directors remains obliged to inform the general meeting in good time if a conflict of interest arises, as allows the general meeting to appoint another representative, or to decide not to do so. Like what we discussed in Question 1 when conflict of interest happens, the concerned person has a duty to report to the relevant organ at once, the company has the option to comply or not comply the best practice provision and followed a series of procedures. The Dutch Corporate Governance Code provide more detail regulations than the Dutch Civil Code.
3.Then compare the Best Practice Rules about conflict of interest of your own country
In China , the Best Practice Rules about conflict of interest in company law can be summarized as follows: the management board members, the supervisory board members and senior managers have the fiduciary and deligent duties to avoid conflit of interest, they shall not abuse the right to injure the interest of creditors and company, if they abuse the right and cause the damages they have to do compensation[12].Company should not lend money or provide guarantee to any of its directors,supervisors and senior managers,should not accept bribe or illegal gains by taking the advantages of his authority ,but if there are some exceptions in the articles of association and these people get the approval of the shareholder`s meeting or the general meeing or management board they are not forced to follow the best pracrice provisions. [13]For example, according to the articles of association and the approval of shareholder`s meeting or general meeting ,the company may provide guarantee and lend money for the shareholders or the actual controllers,but the concerned person could not join thevoting about this decision.Such as ,if the directors or the supervisors follow the articles of association and get approval of the shareholder`s meeting or general meeting they may enter into the contract and do trasanctions with the company;they may do the same or similar business as the company which they severed for.[14]
Different from other countries, we have some special regulations about the best practice rules about conflict of interest of the state-owned companies. According to Article 70 of the Company Law of the People `s Republic of China, none of the chairman, vice-chairman, directors and senior managers of a solely state-owned company may concurrently hold a post in any other companies or economic organizations, unless they get the approval of the state-owned assets supervision and administration institution.■
【References】
［１］Best Company Practice—A Duty of Loyalty for the Purpose of Preventing Abuse of Powers Under Company Law.
［２］See Preamble of The Dutch Corporate Governance.
［３］See II.3.1 of The Dutch Corporate Governance.
［４］See II.3.2 and II.3.3 of The Dutch Corporate Governance.
［５］See II.3.4 of The Dutch Corporate Governance.
［６］See III.6.1 and III.6.2 of The Dutch Corporate Governance.
［７］See III.6.3 of The Dutch Corporate Governance.
［８］See III.6.4 of The Dutch Corporate Governance.
［９］See III.6.5 of The Dutch Corporate Governance.
［１０］See III.6.6 of The Dutch Corporate Governance.
［１１］See III.6.7 of The Dutch Corporate Governance.
［１２］See Article 20 and Article 148 of The Company Law of the People’s Republic of China.
［１３］See Article 116 and Article 148,149 of The Company Law of the People’s Republic of China.
［１４］See Article 149(3),(4),(5) of The Company Law of the People’s Republic of China.