[Direct answer]In the Beijing area, the responsible directors and executives shall bear the liability for their faults. The company's foreign investment constitutes a major business decision, and the necessary decision-making procedures should be carried out in accordance with the company's articles of association and internal rules. Major foreign investments usually require resolutions by the shareholders' meeting or the board of directors, and due diligence investigations and deliberations should be conducted. If directors and senior management personnel violate their fiduciary duties and diligence obligations, exceed their authority or conduct foreign investments without going through the necessary procedures, causing losses to the company, they shall bear the liability for compensation. Directors who participate in the board of directors' resolutions shall bear the liability for the company's losses caused by the resolutions; however, if it is proven that they expressed dissent during the voting and it is recorded in the meeting minutes, they may be exempt from liability. Directors, managers, and other personnel who specifically implement the investment shall also be held accountable if they are at fault. If the losses are caused by a third party, the third party shall bear the liability for compensation.

1. Problem background and typical scenarios

The company invested a large amount of money in foreign projects to expand its business without sufficient justification, and ultimately suffered huge losses due to the failure of the investment. When shareholders questioned the responsibility, some people evaded the issue by claiming that it was a collective decision, while others argued that they were just executors. Who should be held responsible for the illegal foreign investment decisions and how should the responsibility be allocated? This directly affects whether the company can recover its losses.

II. Key points of contention

First, the decision-making process and authorization limits for foreign investment. Second, the determination of the fault of directors and executives and the scope of their responsibilities. Third, the allocation of responsibilities and exemption from liability of directors in collective decision-making. Fourth, the determination of losses and the avenues for accountability.

III. Professional analysis by Henglue Law Firm

Firstly, decision-making procedures: Investments made by the company abroad constitute major business activities, and such decisions should be made by the shareholders' meeting or the board of directors in accordance with the company's articles of association. Where necessary, due diligence investigations, feasibility studies, and risk assessments should be conducted, and no unauthorized decisions may be made without authorization. Secondly, liability determination: Directors and senior management personnel who violate their fiduciary duties or fail to exercise due diligence, exceed their authority, or conduct investments without following necessary procedures, causing losses to the company, shall bear compensation liability according to the degree of their fault. Thirdly, collective decision-making and exemption from liability: Where a board resolution results in serious losses to the company, the directors who participated in the resolution shall bear compensation liability. However, if it can be proven that they raised objections during the voting and these objections were recorded in the meeting minutes, they may be exempted from liability. Therefore, meeting minutes and records of objections are of great importance. Fourthly, losses and accountability: Losses typically include the loss of investment principal, corresponding interest, and reasonable expenses. The company may initiate legal proceedings to pursue accountability through statutory procedures. Where the company fails to pursue accountability, eligible shareholders may file representative lawsuits. Henglue advises that companies should improve their decision-making and authorization systems for overseas investments, standardize meeting minutes and records of objections, and reduce decision-making risks and liability disputes at the source. If an investment fails due to market factors despite the company having followed reasonable decision-making procedures, this generally constitutes normal commercial risks, and accountability should not be solely based on the outcome. The key lies in whether there were errors in the decision-making process. At the same time, companies should maintain due diligence reports, feasibility studies, and meeting minutes to prove the legitimacy and prudence of their decision-making procedures in the event of disputes.

IV. Practical suggestions and legal basis

The first step is to verify whether the foreign investment has complied with the decision-making and authorization procedures stipulated in the articles of association, and review the meeting minutes and resolution texts. The second step is to sort out the investment's demonstration, approval, and execution chain, and determine the responsible parties and the degree of fault at each link. The third step is to calculate the loss of the investment principal and related expenses, and form a list of losses. The fourth step is to claim compensation through company litigation or shareholder representative litigation, and to distinguish the responsibilities of directors who have objections. The main legal basis: the provisions on the obligations and responsibilities of directors and senior managers in the Company Law of the People's Republic of China (amended in 2018), and the provisions on fault liability in the Civil Code of the People's Republic of China (implemented on January 1, 2021). The specific application shall be subject to the currently effective provisions.

5. Henglu Law Firm's Reminder

There are three key principles for holding investors accountable for investment decisions: major foreign investments should be approved by the shareholders' meeting or the board of directors in accordance with the company's articles of association; directors and senior executives who violate procedures or exceed their authority and cause losses shall be liable for compensation; and those who express clear dissent during voting and have their opinions recorded in the meeting minutes may be exempt from liability. For matters involving corporate commercial affairs and corporate governance, relevant disputes can be resolved through legal channels.Business and contract disputes in enterprisesFor services requiring an overall solution involving corporate compliance and regulations, we can provide integrated support.Intellectual property and corporate lawFor cases involving loss recovery and enforcement, you can refer to the following documents for reference:Creditor's rights and debts, and enforcementFor any questions or difficulties, please feel free to consult us.Special servicesTeam.

VI. Frequently Asked Questions

Q1: Who is responsible for the investment losses?

If a director or senior executive violates the duty of loyalty and diligence, exceeds his/her authority, or fails to follow the decision-making process when making investments, causing losses to the company, the responsible director or senior executive shall bear the liability for compensation; normal commercial risks generally will not be held accountable.

Q2: Can directors avoid liability if they have objections?

Yes. It has been proven that directors who expressed dissent during the voting and had their opinions recorded in the minutes of the meeting can be exempted from liability for the losses caused to the company by the board's resolutions. Therefore, it is very important to keep a record of dissenting opinions.

Q3: Who is suing?

The company may initiate litigation through the board of supervisors or supervisors, or the board of directors or executive directors; if the company fails to take action, eligible shareholders may initiate shareholder representative litigation.

Q4: How is the loss calculated?

It generally includes the loss of the investment principal, the corresponding interest, and the reasonable expenses incurred for the pursuit of accountability; a list of quantifiable losses should be compiled based on the investment amount, the recovery situation, and the causal relationship.

Q5: What are the procedures for investing?

Major foreign investments shall be decided by the shareholders' meeting or the board of directors in accordance with the company's articles of association, and due diligence and risk assessment shall be carried out. For those involving guarantees or related-party transactions, the corresponding approval and disclosure procedures shall also be followed.

The above content is based on the judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglue Lawyers about specific situations.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials, so as to avoid missing the statutory time limit. →Business and commercial legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.