MACAU SAR, CHINA Law and Practice Contributed by: João Nuno Riquito, Nelson de Azevedo, Belmiro Leong and Kimberley Cheong, Riquito Advogados
holding threshold as prescribed by Article 248 may bring the claim on the company’s behalf. • If a director’s conduct directly harms the individual rights of a shareholder, such as by violating the right to information or profit distribution, that share - holder may sue in their own name under Article 250. Likewise, where the company’s assets are insufficient to satisfy its debts because of a direc - tor’s breach – for example, failing to take action when net assets fall below half of the share capital – creditors may bring a claim against the director. • When a director breaches their duties repeatedly, constituting a just cause for removal, the general meeting may remove the director from the man - agement body (Article 389, paragraph 4; and Arti - cle 463, paragraph 1). If the general meeting fails to act, or if the director is also a controlling sharehold - er, one or more shareholders holding at least 10% of the company’s capital may petition the court for judicial removal (Article 463, paragraph 2). • Furthermore, a controlling shareholder who exer - cises control, either individually or through others, to the detriment of the company or other share - holders shall be liable for the resulting damages. Directors shall be held jointly and severally liable with the controlling shareholder if they perform any act, or enter into a contract with a company in which they are a controlling shareholder on unequal terms, for their own benefit or that of a third party, or when they fail to prevent such acts or contracts despite having the power to do so (Article 212, paragraph 4). In cases involving public interest, or where a direc - tor’s conduct constitutes a criminal offence, the public prosecutors may ex officio conduct a criminal investi - gation to pursue criminal liability. 3.9 Other Claims/Enforcement Against Directors/Officers In addition to resolutions by the general meeting to initiate lawsuits, and lawsuits filed by shareholders meeting the threshold when the company does not execute such resolutions, the following remedies also exist. • Judicial inspection: If shareholders have sufficient reason to suspect serious irregularities in the
company’s operations, they may apply to the court for a judicial inspection. The court can appoint an auditor to investigate and clarify the facts, serving as a basis for subsequent accountability (Article 211). • Creditor’s subrogation rights: When a company’s assets are insufficient to settle its debts and the company itself fails to exercise its right to claim damages from directors, creditors may exercise this right on the company’s behalf, by subrogation to demand that directors fulfil their liability to the company and subsequently to the creditors (Article 249, paragraph 2). • Administrative liability in regulated sectors: In specific industries such as finance or gaming, if a company faces administrative fines from regulatory bodies, such as the Monetary Authority of Macao ( Autoridade Monetária de Macau – AMCM) or DICJ, for violating specific regulatory laws, directors may be held jointly and severally liable for these fines. For example, a director of a financial institution who violates management regulations could face fines ranging from MOP20,000 to MOP3 million (Article 121 of Law 13/2023 Legal Framework for the Financial System). Regarding the civil liability of directors, it should be noted that while the MCC does not detail this specific rule in practice, if a director can prove that their deci - sion was based on sufficient information and made in good faith, and that they acted as a reasonable busi - ness person, they are generally not considered negli - gent and are exempt from compensation, even if the decision ultimately resulted in a loss for the company. Furthermore, whether a director’s civil liability can be limited through the articles of association is a subject of debate. In practice, there are two common methods to limit director liability. • Directors and officers insurance: The company can maintain insurance for its directors. This is the most effective way to transfer legal fees or dam - ages arising from management negligence within the scope permitted by law. • Indemnification clauses: The company may stipu - late that it will indemnify directors for civil liabilities incurred by third parties while performing their
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