Challenges in Applying the Fiduciary Duties of Actual Controllers and Paths to Improvement Under the New Company Law

Abstract

The “Company Law of the People’s Republic of China” revised in 2023 clarified for the first time at the legislative level that controlling shares and actual controllers who are not company directors but actually perform company affairs are also subject to the directors’ duties of loyalty and diligence. This has made up for the previous lack of fiduciary duty regulations to a certain extent. However, this provision still continues the tradition of principled legislation. In judicial application, it faces practical difficulties such as different standards for subject identification, vague scope of obligated objects, lack of behavioral judgment standards, and poor accountability mechanisms. Starting from the framework of the new company law, combined with my country’s judicial practice and reference to regulatory experience from abroad, this article proposes a systematic improvement path from four dimensions: reconstruction of identification rules, clarity of obligation boundaries, refinement of judgment standards, and improvement of the accountability system, with a view to improving the operability of the actual controller’s fiduciary obligations in practice and strengthening the protection of the interests of multiple entities such as the company, small and medium-sized shareholders, and creditors.