MACAU SAR, CHINA Law and Practice Contributed by: João Nuno Riquito, Nelson de Azevedo, Belmiro Leong and Kimberley Cheong, Riquito Advogados
3.5 Independence of Directors Although the MCC does not explicitly adapt the term “independence”, Article 235 of the MCC stipulates that members of a company’s management body must always act in the company’s best interests and with the care of a reasonable business person (bonus pater familias). The independence of directors in cor - porate governance is implicitly integrated into this concept of a reasonable business person. This is an objective standard, requiring directors to possess the knowledge, technical skills and diligence appropriate to their position. This duty includes a duty of loyalty, which mandates that directors must prioritise the company’s best interests and must not allow personal interests to conflict with their professional duties. As the law employs an indeterminate concept, it requires judicial interpretation by the courts to elabo - rate on the meaning of a reasonable business person; thus, its application depends on the specific circum - stances of each company. Regarding the regime for limited liability companies by shares, the MCC contains two express provisions addressing conflicts of interest: • in relation to related-party transactions, it is stipu - lated that contracts between the company and its directors typically require prior approval by the board of directors or the supervisory board – oth - erwise, such contracts may be rendered invalid under Article 460; and • in board resolutions, if a board member has a con - flict of interest regarding the matter under resolu - tion, that member is prohibited from voting on the resolution (Article 467, paragraph 6). Although the aforementioned provisions are catego - rised for limited liability companies by shares, the cor - responding rules can be derived from the fundamen - tal principle imposed upon a “reasonable business person” and should likewise apply to other types of companies, including limited liability companies by quotas. Please also refer to 3.6 Legal Duties of Directors/ Officers and 3.7 Responsibility/Accountability of Directors .
A director’s mandate may be terminated at any time by a shareholders’ resolution, without prejudice to any compensation rights that may arise, particularly if ter - minated without cause. Shareholders holding at least 10% of the capital may also apply to the court for the removal of a director for cause (Article 463). 3.4 Appointment and Removal of Directors/ Officers Directors are elected by shareholders during the annu - al general meeting (Article 220 of the MCC, paragraph 1c). If a director dies, is removed or resigns during the term, shareholders may conduct an election at an extraordinary general meeting (EGM) to fill the vacan - cy (Article 220, paragraph 3). Shareholders may remove directors at any time, even if removal is not on the agenda of the general meet - ing (Article 220 of the MCC, paragraph 2; Article 389, paragraph 1; and Article 463, paragraph 1). The arti - cles of association can establish that the removal of one or more directors has to be resolved by a qualified majority (Article 389, paragraph 2). Where a share - holder has to be granted a special right to manage the company and that right is set out in the articles of association, that shareholder may only be removed by court decision, not by a shareholders’ resolution (Article 389, paragraphs 3 and 4). A director may also be removed for cause, by court decision, on the application of a shareholder or anoth - er director (Article 389 of the MCC, paragraph 5; and Article 463). It is qualified as a justified cause when there is a material or continuous breach of the direc - tors’ duties, understood as: • the failure or undue delay to register facts or acts that must be registered; • the failure to maintain the company’s books in proper order and to keep them updated; and • the exercise of competing activities by the director (Articles 389 and 463). For matters regarding quorum, voting requirements and the proposal of resolutions, please refer to 4.3 Shareholder Meetings and 3.8 Breach of Directors’ Duties .
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