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Directors’ duty of care, diligence and skill : a comparative study of Japanese and Canadian law Toriumi, Tetsuro

Abstract

Most of the powers of the modern corporation are vested not in the general meeting, but in the Board of Directors. It is therefore important to see whether these powers are properly controlled. Both Canadian and Japanese company law adopt a similar view on the allocation of the administration and control between directors and shareholders. In addition, directors have two kinds of duties: duties of care, skill and diligence; and fiduciary duties. However, there are important contrasts between the development of directors' duties in Canada and in Japan. In Canada, the common law has not been nearly as effective in developing a managerial duty and skill as it has been in the elaboration and enlargement of fiduciary duties. There are few cases where directors have been found liable for breach of a duty of care, diligence and skill. Conversely, there are numerous instances in Japanese law where directors have been found liable. This paper compares and contrasts Japanese and Canadian law regarding directors' liability for mismanagement and negligence in the performance of their duties. It is suggested that there are two principal reasons for the differences between Canadian and Japanese principles: one is whether or not directors owe a duty to third parties rather than simply to the company; the other is the strictness of the standards of care, diligence and skill which are owed by directors. By comparing Canadian and Japanese law, it is intended not only to point out differences but also to suggest possible ways which encourage directors to increase their care, diligence and skill in performing their duties.

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