2024 Chinese New Year Outlook Who loses money when a legal person makes a mistake? Can the company find the post-account? With the increasing complexity of the business environment, the issue of corporate governance has become more and more important. In order to protect the interests of the company and shareholders and prevent the legal representative from abusing his power and harming the rights and interests of the company and shareholders, the third paragraph of Article 11 of the newly revised Company Law clearly stipulates the liability and recovery mechanism for the legal representative when he or she causes damage to others due to the performance of his or her duties.
If a legal person makes a mistake and infringes on the civil rights of others, the company should be liable for compensation in advance. According to the newly revised Company Law, when the legal representative causes damage to others due to the performance of his duties, the company shall first bear civil liability. This means that regardless of whether the legal representative is at fault or not, the company must compensate the injured party for its losses in advance. In other words, if a legal person makes a mistake due to work reasons, it does not need to be compensated in advance. However, if a legal person is at fault in the performance of its official duties, can the company also not hold the legal person liable? No, the new law has been amended to clarify the circumstances under which a company can recover from a legal person.
How can the company recover? After the company assumes civil liability, it does not mean that the liability of the legal representative ends. According to the provisions of the law or the articles of association, the company has the right to recover from the legal representative who is at fault. This means that if the legal representative is at fault in the course of performing his duties, the company has the right to require him to bear the corresponding liability for compensation, and the basis for recovery is the relevant provisions of the law or the Articles of Association.
In short, the third paragraph of Article 11 of the newly revised Company Law provides a sufficient legal basis for the company and its shareholders to strengthen corporate governance and risk prevention, ensure the steady development of the company, and ensure that the legal person fulfills the duty of care in the performance of its duties.