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Seminar on June 12

(Summary Report, By Sang Yi Tao)
 
Time:18:30~19:30,june 12, 2011
Place:in the campus
Moderator:Sang Yitao
Member:Wang Junqi, Gong Shu,Sang Yitao, Ma Hongjun
Scope of the presentation: Section 5-10 of Chapter 9.


PartⅠThe discussion

Topics:
1 Please talk about your understanding on "the duty of good faith" and "the duty of loyalty", and what are the legal requirements in this regard? 2 This chapter mainly mentioned which actions of violate the fiduciary duty, what the legal requirements in these areas?



Gong Shu
Question 1
Duty of good faith refers to the fiduciary behaviors that intentionally harm the corporation. It may be shown where the fiduciary intentionally acts with a purpose other than advancing the best interest of the corporation, or with the intent to violate applicable positive law, or fail to acts in the face a known duty to act.
Duty of loyalty involves a conflict of interest —the fiduciary is temped to put her own interest above the interest of corporation. That is, a fiduciary is required to act with more than the morals of the market place. It is defined in most state legislature as: a fiduciary must discharge her duties in a manner reasonably believes to be in the best interests of the corporation. It contains three fact patterns: self-dealing, usurp the corporation opportunity and engaged in a competing venture.
Question 2The violation of fiduciary duties the author talked most is self-dealing. It refers to the situation when a fiduciary enters a contract with the corporation in which herself served as a director. In common law, the corporation is allowed to void the contract at will in that case, unless the fiduciary can prove it is business needs by showing: 1 the transaction was fair to the corporation when entered, 2 was approved by disinterested directors or shareholders. The provision above about self-dealing is in principle g while the details are vary from state to state.

Sang Yi Tao


It has always been clear that fiduciaries must act in good faith. The duty of good faith hand little content beyond the rare, obvious case in which a fiduciary acted intentionally to harm the corporation. In the past generation, the duty of good faith has been invigorated. Duty of the loyalty cases involve a conflict of interest —the fiduciary is tempted to put her own interest above that of the corporation. Once the plaintiff shows the conflict of interest, the burden usually shifts to the defendant to show that she comported with the duty of loyalty.
Many statutes provide that a corporation cannot exculpate “for acts or omissions not in good faith”. The duty of loyalty developed at common law. There is a great deal of loyalty language in the opinion.
Question 2A fiduciary owes the business duties of good faith, care, and loyalty. Self-dealing and usurpation of business opportunities violate the fiduciary duty. Self-dealing refers generically to any transaction in which a fiduciary is on both side. Modern law dose not allow the corporation to void a contract solely because of such a conflict of interest. The old version of the MBCA defines a self-dealing transaction. The fiduciary who usurps must put the corporation in the position it should have been in absent her breach. If a court concludes that something was a business opportunity, the fiduciary is not necessarily precluded from taking advantage of it. In the traditional, shareholders of a corporation do not owe fiduciary duties to each another. At least in some states controlling shareholders owe a fiduciary duty not to oppress minority shareholders or the corporation.

Ma Hongjun:
Question 1
(1)For the first question, I think it is very important that fiduciaries must act in good faith. In the past generation, the duty of good faith has been invigorated. And statutes allow corporations to eliminate manager liability for damages. As a matter of logic, the duty of good faith and the duty of care cannot be co-extensive. If they were,The duty of good faith woul have no independent status, and the legislature’s reference to “acts or omissions not in good faith” would be meaningless. At last, the duties of good faith, care. And loyalty are always together. It is quite likely that acts or omissions that breach the duty of good faith will also breach the duty of care or the duty of loyalty.(2) The duty of loyalty is that a fiduciary must discharge her dutyes in a manner that she reasonably believes to be in the best interests of the corporation. The duty of loyalty involve a conflict of interest that the fiduciary is tempted to put her own interest above that of the corporation. In conflict of interest cases, the BJR does not apply. So once the plaintiff shows the conflict of interest, the buren ususlly shifts to the defendant to show that she comported with the duty of loyalty. Speaking very generally, there are three fact patterns that implicate the duty of loyalty. First is self-dealing, Second is a fiduciary’s usurpation of a business opportynity, Third is the fiduciary’s engaging in a competing venture.
Question 2For the second question, in my opinion, Self-dealing and usurpation of business opportunities violate the fiduciary duty. Firstly, Self-dealing refers generically to any transaction in which a fiuciary is on both sides. A Self-dealing transaction as one with the corporation in which the director of the corporation has a direct or indirect interest. It is that she had an indirect interest if the deal was between te corporation and another entity in which she has a material financial interest or in which she is a general partner, officer, or director. But the statutes permit a fiduciary to avoid having an interested transaction set aside and she must show that the transaction was fair to the corporation when it was fair to the corporation when it was entered. Secondly, most of the law of business opportunities is judge-made and some courts defined an opportunity as something necessary to the business, or required that the business have interest in the specific property the fiduciary acquired. And if a court concludes that something was a business opportunity, the fiduciary is not necessarily precluded from taking advantage of it. 
     
Wang Junqi:
question1:
In the corporate world, managers those with power to direct the business are fiduciaries of the business, there are three basic duties including good faith, care and loyalty.
First, I want to talk about the duty of good faith, a manger must act in good faith, a manager must act in good faith toward her business seems an obvious requirement, the duty of good faith had historically little content beyond the rare, obvious case in which a fiduciary acted intentionally to harm the corporation. in the past generation, the duty of good faith has been encouraged .the duty of good faith varies from state to state, many statues provide that a corporation can not exculpate for acts or omissions not in good faith.
Second, I will talk about the duty of loyalty the duty of loyalty is obvious when a manager has a conflict of interest, duty of loyalty cases involve a conflict of interest-the fiduciary is tempted to put her own interest above the corporation. Most states have a counterpart which defines the general duty of loyalty: a fiduciary must discharge her duties in a manner she reasonably believes to be in the best interests of the corporation. Beyond this, most states also have rather detailed provisions about one classic duty of loyalty pattern called self-dealing. That’s all.
question2:
A fiduciary owes the business duties of good faith, care, and loyalty. It is possible that a single act by a fiduciary may violate all three duties.
First, failure to monitor violate the fiduciary duty ,we noted that directors must satisfy the duty of care both with their decision-making function and their oversight function the theory is that the directors failed to monitor what the employees were doing, and thereby breached the duty of care.
Second, a failure to act in good faith may be shown, for instance, where the fiduciary intentionally acts with a purpose other than that of advancing the best interests of the corporation, where the fiduciary acts with the intent to violate applicable positive law, or where the fiduciary intentionally fails to act in the face of a known duty to act, demonstrating a conscious disregard for his duties.Third, because of the ingenuity of selfish people, there are some ways to breach the duty of loyalty. Such as self-dealing, statues provide that an interested director transaction is not voidable.  Another is fiduciary's usurpation of a business opportunity, and the fiduciary's engaging in a competing venture. That’s all.


 
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