MACAU SAR, CHINA Law and Practice Contributed by: João Nuno Riquito, Nelson de Azevedo, Belmiro Leong and Kimberley Cheong, Riquito Advogados
3.6 Legal Duties of Directors/Officers In addition to the requirements mentioned in 3.5 Inde- pendence of Directors , the MCC stipulates other sig - nificant duties for directors. • Under Article 206, if the annual accounts shows that the company’s net asset value has fallen below half of its share capital, the management body must propose the following: if shareholders do not contribute the cash required to restore the company’s assets to the level of its share capi - tal within 60 days of the approval of the annual accounts, the company shall be dissolved, or its capital reduced. • Furthermore, under Article 254, at the end of each financial year, the management body must pre - pare the annual accounts, the annual report and a proposal for the application of profits. However, if all shareholders are also members of the manage - ment body and the company has no supervisory board or sole supervisor, the annual report and the profit application proposal may not be required. • Additionally, Article 194 stipulates that the com - pany must ensure equal treatment of sharehold - ers. The fulfilment of this duty relies entirely on the directors, as the management body represents the company and is accountable to the shareholders. This duty is reflected in the shareholders’ right to information stipulated in Article 209, as in most cases, the scope of this right does not depend on the shareholder’s percentage of shareholding. Whether shareholders can effectively exercise this right depends on whether the directors have ful - filled their duty to ensure equal treatment. In special laws, the legal framework can also establish specific duties of directors. Please also refer to 3.7 Responsibility/Accountability of Directors . 3.7 Responsibility/Accountability of Directors Under the legal framework of Macau, directors’ duties are primarily owed to the company. Directors are regarded as the company’s representatives as the pri - mary legal liability is towards the company as a legal entity, rather than individual shareholders. Although the duty is owed to the company, directors must be
accountable to the shareholders as a whole during the general meeting. This is reflected in the directors’ obligation to ensure equal treatment of shareholders and to respect their right to information. When discharging their duties, in addition to consider - ing the best interests of the company, directors must also take into account the interests of the following groups. • Creditors: When the company’s net asset value falls below half of its share capital, under Article 206, directors have a legal obligation to propose that shareholders inject new fund for capital, reduce capital or dissolve the company. One of the core purposes of this regulation is to protect credi - tors by preventing the company from continuing operations under conditions of insufficient assets. If a director violates the law or the articles of asso - ciation, causing damage to company assets that affects the creditors’ recovery, creditors may hold the director liable, under specific conditions. • Employees: Although the definition of a “reason - able business person” in the Commercial Code is relatively abstract, in practice and legal theory, directors must also comply with the Macau Labor Relations Law while pursuing company interests to ensure that the legitimate rights and interests of employees, such as wage payments and a safe environment, are implemented. • Public and social interests: For specific types of companies, such as regulated financial institu - tions, the law requires directors to consider social public interests or market stability during decision- making. 3.8 Breach of Directors’ Duties Under the MCC, the mechanisms for enforcing directors for breaching their duties are various, with legal consequences covering both civil and criminal aspects. • The company may bring a damages claim against a director. This requires a resolution passed by the general meeting of shareholders, provided for by Article 247. If the general meeting refuses to act, minority shareholders fulfilling the statutory share -
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