Legal Liability of Directors and Company Officials Part 1: Substantive Grounds for Liability (Report to the Russian Securities Agency)

Abstract

This Article contains chapters 1 and 3 of a World Bank sponsored Report, prepared in December 2006, to the Russian Federal Service for the Financial Market (FSFM). It discusses the liability under company law of directors, senior company officials, and controlling shareholders of public companies in Canada, France, Germany, Korea, Russia, the United Kingdom, and the United States (with a more limited look at Austria, the European Union, Italy, Japan, and Latvia), and recommend amendments to Russian Company Law. It proposes measures to define the concepts of good faith and conflict of interest; establish duties of disclosure and confidentiality extend duties under company law to controlling shareholders and de facto directors for conflict of interest transactions; and protect directors against liability for business decisions adopted without a conflict of interest. The Article includes an Introduction for Prof. Black which provides an overview of Russia’s progress in creating a modern company law. A related Article includes chapters 8-9 and 11-13 of the Report, and addresses procedural rules for shareholder lawsuits and administrative and criminal liability of directors and company officials. See Legal Liability of Directors and company Officials Part 2: Court Procedures, Indemnification and Insurance, and Administrative and Criminal Liability (Report to the Russian Securities Agency), 2008 Colum. Bus. L. Rev., available at http://ssrn.com/abstract=1010307. The full Report is available at htpp://ssrn.com/abstract=1001990 (English version) and http://ssrn.com/abstract=1001991 (Russian version).