Shaking the Principles of the Free Market Economy
Comparison of Domestic
Commercial Act Amendment
with Overseas Legislative Examples
Commercial Act Amendment that Deviates from Global Standards
United States
Model Business Corporation Act
Section 8.30(a)2
Section 8.31(a)
[Section 8.30(a)2] (Each member of the board of directors, when discharging the duties of a director, shall act) in a manner the director reasonably believes to be in the best interests of the corporation.
[Section 8.31(a)] A director shall not be liable to the corporation or its shareholders for any decision to take or not to take action, or any failure to take any action, as a director.
=>[Section 8.31(a)] of the Model Business Corporation Act mentions both shareholders and corporations but focuses on setting the limits of a director’s liability. It clarifies that the directors are not liable to the shareholders or the corporation if the party claiming the directors’ responsibility cannot prove fault.
United Kingdom
Companies Act (2006)
Section 170(3)
Section 172(1)
[Section 170(3)] States that directors have duties to the company according to common law and equitable principles formed by case law, which explicitly rejects a director’s duty of loyalty to shareholders.
[Section 172(1)] Directors must act in the way they consider, in good faith, most likely to promote the success of the company for the benefit of its members as a whole…
[Case law] Recent UK High Court decisions confirm that “the status of a director alone does not impose a duty of loyalty to shareholders” (Vald Nielsen Holding A/S v.Baldorino [2019] EWHC 1926, 721.4).
Germany
Stock Corporation Act
Section 93(2)
Specifies that members of the management board are jointly and severally liable to the company for damages resulting from their breach of duties, with no mention of obligations to shareholders.
Japan
Companies Act
Section 355
Requires directors to execute their duties faithfully for the company
*A precedent in the Tokyo District Court recognized the duty to consider the collective interests of shareholders (Feb. 2011).
Even when reviewing overseas legislative examples, it is difficult to find cases where the shareholders’ interests and the company’s interests are defined as separate concepts. The regulations that mention shareholders typically express the general notion that “company interests = shareholder interests.” One of the examples cited by proponents of the Commercial Act amendment is the Delaware General Corporation Law (Section 102(b)(7)) in the United States.
Delaware General Corporation Law Section 102 – Contents of Certificate of Incorporation
(b) <Omitted>
7. A provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders;
*Source: Sang-hoon Lee, “A comparative study on the duty of loyalty of a director of the company to its shareholders,” The Journal of Comparative Private Law, Vol. 29, Issue 3, Korean Association of Comparative Private Law, 2022, p. 134.
Many scholars explain that this provision is simply a general statement that “if it benefits the company, it will also benefit the shareholders,” and it cannot be interpreted as imposing a duty on directors to prioritize shareholder interests separately from company interests.
Delaware General Corporation Law Section 102(a) lists the “required provisions of the certificate of incorporation,” with Section 102(b) enumerating the “optional provisions that may be included.” ⇒ Therefore, companies may voluntarily choose to include in their certificate of incorporation a provision stating that “directors are not exempt from liability for breach of fiduciary duty to shareholders.” However, this does not mandate a fiduciary duty to shareholders as a compulsory regulation.
*Source: Korea Listed Companies Association, Review of the Commercial Act Amendment, June 2024.
Upon closer examination of the foreign legislative examples cited to support the Commercial Act amendment, it is clear that they do not specifically impose on directors a fiduciary duty toward shareholders. Even among the few international legislative examples presented by proponents, there is no case where directors are explicitly required to bear fiduciary duties toward shareholders in advanced economies.
