[Direct answer]In the Beijing area, directors, supervisors, and senior management are generally not directly liable to investors, and the company shall first compensate for damages caused by their official acts; however, there are statutory exceptions. According to Article 191 of the Company Law of the People's Republic of China (amended on December 29, 2023 and implemented on July 1, 2024), if a director or senior manager causes damages to others in the performance of their duties, the company shall bear the liability for compensation. If the director or senior manager has intentional or gross negligence, they shall also bear the liability for compensation. In the case of information disclosure violations, according to Article 85 of the Securities Law of the People's Republic of China (amended on December 28, 2019 and implemented on March 1, 2020), the controlling shareholders, actual controllers, directors, supervisors, and senior managers of the issuer shall bear joint and several liability for compensation based on the presumption of fault in the event of losses to investors. In the private equity field, if the manager fails to fulfill the obligation of suitability or fails to exercise due diligence and cause losses to investors, the manager shall compensate them in accordance with the law. For more details, please refer to the relevant provisions.\nFinancial capital and cross-border legal services involving foreign affairs.

1. Problem background and typical scenarios

Fund defaults, private equity defaults, financial product losses, and false statements by listed companies — when investors try to recover their losses, the most common question they ask is: Since the company has no money anyway, can we sue the directors, supervisors, and executives personally? Typical scenarios include: private equity managers exaggerating returns, concealing risks, misappropriating or mixing funds, and failing to recover losses during the liquidation stage; listed companies' plummeting share prices after being fined for financial fraud; and financial products being promoted without risk assessments or suitability matching. Investors often only sue the company, or want to hold individuals accountable but get stuck on proving their fault. For related legal remedies, please refer to the following resources:Financial capital and cross-border legal services involving foreign affairs.

II. Key points of dispute

The disputes in such cases focus on four points. Firstly, the layered responsibility of the responsible parties: the company is the primary responsible party, and directors, supervisors, and senior executives are only liable under statutory circumstances. Listing them as defendants directly requires a clear basis for the right of claim. Secondly, the threshold of fault: in general scenarios, it is necessary to prove that the directors and senior executives have intentional or gross negligence; in the scenario of information disclosure violations, the controlling shareholders, actual controllers, and directors, supervisors, and senior executives apply the presumption of fault, and they can only avoid liability if they can prove that they are not at fault. Thirdly, the causality and scope of losses: the compensation is limited to the actual losses, and the amount of compensation already paid must be deducted. Investors' own faults, such as providing false materials, may be deducted at the discretion of the court. Fourthly, the difficulty of providing evidence: the company's internal decisions, post-investment management, and liquidation records are held by the company, and investors need to obtain them through arbitration and litigation procedures. The organization of evidence directly determines the success or failure of the case.

III. Professional analysis by Henglue Lawyers

A private equity fund investment arbitration case handled by Attorney Yang Yafang fully demonstrated the process of determining the manager's liability. On September 21, 2020, investor Ge * signed the "No. **** Investment Fund Contract" with A Investment Management Co., Ltd. through the A Wealth APP, subscribing to a private equity fund worth 1.6 million yuan. The next day, he paid the investment funds into the fundraising special account, and on September 24, his holding shares were confirmed. The fund failed to achieve the contractually agreed stable returns and was terminated on August 4, 2021. As of April 21, 2023, although 12 liquidation procedures had been completed, Ge * only received a total of 213,613.64 yuan in liquidation proceeds, and the remaining principal and returns could not be redeemed. Investigation revealed that A Company, as the manager, failed to fulfill its suitability obligation to Ge * and failed to truthfully disclose risks; the investment operations deviated from the contractual provisions, with a large amount of funds invested in the overdue projects of shareholder B Group; the series of funds issued by the company were rolled out and mismatched in terms of maturity, constituting fund pool operations; and it failed to fulfill its information disclosure obligations as required. After accepting the mandate, Attorney Yang Yafang sorted out key evidence such as order details, client receipts, fund contracts, APP screenshots, liquidation reports, quarterly reports, and private equity fund public information, and retrieved administrative supervision documents such as the "Order to Correct Measures" and "Warning Letter Measures" issued by the Shanghai Securities Regulatory Bureau, forming a complete chain of evidence. The attorney put forward core opinions: the manager failed to fulfill its suitability obligation; the investment operations were irregular, and the manager failed to fulfill its duty of diligence and care; it failed to take legal measures to prevent losses from expanding during the liquidation stage; breaking the rigid redemption does not exempt the manager from its statutory obligations; and the seller's failure to fulfill its obligations should not result in the buyer bearing losses. Based on multiple breaches of contract, the arbitration tribunal ruled that the manager failed to fulfill its suitability obligation, violated the prohibition of commingling fund property, and failed to fulfill its duty of diligence and care, ordering the return of investment funds of 1,386,386.36 yuan and interest, attorney's fees of 40,000 yuan, and arbitration fees of 42,549.88 yuan. At the same time, it pointed out that Ge * should also bear corresponding responsibility for submitting a false annual income certificate, and deducted part of the compensation accordingly. The case was handled by Beijing Henglu Law Firm.Yang YafangThe attorney (practice license number: 11101202211531374, subject to the document issued by the judicial administrative organ) acts as the agent. It should be noted that the respondent in this case is the management company, and the directors, supervisors, and senior executives of the company are not listed as respondents. If investors claim compensation from the directors, supervisors, and senior executives of the company, they still need to prove their intentional or gross negligence in accordance with Article 191 of the Company Law, which has a significantly higher threshold than holding the management company accountable for breach of contract.

IV. Practical suggestions and legal basis

The legal basis includes Article 180 (Fiduciary and Diligent Obligations of Directors, Supervisors, and Senior Management) of the Company Law of the People's Republic of China (amended on December 29, 2023 and implemented on July 1, 2024); Article 188 (Liability for Compensation of Directors and Supervisors to the Company); Article 191 (Liability for Compensation of Directors and Senior Management to Third Parties); Article 192 (Joint and Several Liability for Directive Actions of Controlling Shareholders and Actual Controllers); Article 11 (Liability and Recovery for Acts of Legal Representatives); Article 85 (Presumption of Joint and Several Liability for Violations of Information Disclosure) of the Securities Law of the People's Republic of China (amended on December 28, 2019 and implemented on March 1, 2020); the provisions on suitability obligations in the Interim Measures for the Supervision and Administration of Private Equity Investment Funds (CSRC Order No. 105, implemented on August 21, 2014) and the Measures for the Suitability Management of Securities and Futures Investors (CSRC Order No. 130, implemented on July 1, 2017); and the provisions on the duties of managers in the Regulations on the Supervision and Administration of Private Equity Investment Funds (State Council Order No. 762, implemented on September 1, 2023). Action List: 1. Preserve contracts, transfer vouchers, promotion materials, risk assessment and follow-up records. 2. Check the announcements of administrative supervision and self-discipline measures by the China Securities Regulatory Commission and the Asset Management Association of China. 3. Distinguish between the manager's breach of contract liability and the directors', supervisors', and senior management's personal tort liability, and organize evidence separately for each. 4. Assert rights through arbitration or litigation, and apply for preservation measures promptly if there are signs of property transfer. 5. If the manager fails to pursue recovery of damages during the liquidation stage, simultaneously assert the manager's liability for expanded losses. For details, please refer to the following link: [Link].Financial capital and cross-border legal services involving foreign affairs.

5. Henglu Law Firm's Reminder

Holding directors, supervisors, and senior executives personally liable is a feasible approach, but it's not the default path: the threshold of intent or gross negligence in Article 191 of the Company Law determines that it is usually a supplement to, rather than a substitute for, the management's liability. A more prudent strategy for investors is to first establish the breach of contract liability of the management and related parties, and then assess whether to add individual defendants. Administrative supervision findings are extremely valuable for civil cases, and the CSRC's penalties and orders to make corrections are often key sources of evidence of fault. In addition, if investors themselves provide false materials or ignore risk warnings, the court may deduct their compensation accordingly. When seeking legal protection, investors should have reasonable expectations. When handling similar cases in the Beijing area, it is recommended to engage a lawyer as soon as possible.Beijing Henglu Law FirmProfessional lawyers sort out the evidence and the structure of responsibilities.

VI. Frequently Asked Questions

Q1: Can we sue the directors, supervisors, and senior executives together?

You can try, but the personal liability threshold is obviously higher than that of the company. In general, it is necessary to prove according to Article 191 of the Company Law that the directors and senior managers committed intentional or gross negligence in the performance of their duties, such as misappropriating funds, engaging in illegal related-party transactions, or intentionally allowing losses to expand during the liquidation stage; in the case of information disclosure violations, according to Article 85 of the Securities Law, the controlling shareholders, actual controllers, and directors, supervisors, and senior managers of the issuer shall bear joint and several liability based on the presumption of fault. If the evidence is insufficient to prove personal fault, the court may only hold the company liable. The conclusions of individual cases shall be based on the evidence and the court's determination.

Q2: What evidence do I need to prepare to hold someone accountable?

The core materials can be divided into four categories: 1. Contracts and financial evidence, including fund contracts or product contracts, subscription agreements, transfer receipts, and share confirmation records. 2. Evidence of suitability and promotion, including risk assessment questionnaires, risk disclosure documents, promotional materials and chat records, and follow-up call recordings. 3. Evidence of professional negligence, including post-investment management reports, liquidation reports, related-party transaction records, internal decision-making documents, and administrative supervision measures and penalties announced by the China Securities Regulatory Commission. 4. Evidence of losses, including amounts already paid and unpaid, interest calculation basis, and invoices for legal fees and arbitration fees. Internal documents typically need to be retrieved through arbitration or litigation procedures, so it is advisable to initiate these processes as soon as possible.

Q3: How much does it cost to protect one's rights in this kind of situation?

The arbitration fees or litigation fees shall be paid in stages according to the amount of the claim, with the losing party bearing the cost. In the case of partial victory, the fees shall be shared proportionally. The arbitration fees for the aforementioned arbitration case amount to 42,549.88 yuan. For applying for property preservation, the party shall pay the preservation fees separately or provide a guarantee. The attorney's fees shall be determined through consultation between the parties, and there is no unified government pricing. The fees may be charged on a percentage basis or on a per-case basis. For financial cases, the amount of the claim is usually large, and the fees increase in proportion to the scale of the claim. It is recommended to clarify the charging methods, stages, and scope with the attorney before entrusting the case and to calculate the expected recovery.

Q4: How long does it usually take to protect one's rights?

For arbitration procedures applying simplified procedures, the arbitral award is generally made within three months after the formation of the arbitral tribunal, and for ordinary procedures, it is made within six months. For complex cases, the time limit may be extended; for first-instance litigation, the ordinary procedure is completed within six months and the simplified procedure within three months; for cases involving audits and appraisals, the corresponding periods are not included in the time limit for enforcement. The enforcement stage depends on the financial status of the responsible parties. In the above-mentioned private equity arbitration cases, it took about two years from the termination of the fund to the arbitral award, with considerable time spent on liquidation and evidence collection. Overall, cases with clear facts and complete evidence usually obtain an award within one year, while complex cases may span across multiple years.

Q5: If you find that there are problems with your investment, what should you do first?

Four steps to advance: First, comprehensively fix evidence, including contracts, transfer records, promotion materials, risk assessments, account and share records, and communication records, to prevent back-end data from being cleared; Second, verify the public information of managers and products, including the fund industry association's filing, the regulatory measures and punishment records of the securities regulatory bureau; Third, entrust lawyers to assess the liability for breach of contract and personal faults, and determine the path of arbitration or litigation and the scope of respondents; Fourth, if there are signs of managers transferring assets or misappropriating project repayments, apply for property preservation in time and urge managers to take recovery measures during the liquidation stage. It's better to protect one's rights as soon as possible.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit.Financial capital legal services·Attorney Yang Yafang·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on current laws and regulations and publicly available adjudication rules, and is provided 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. In the event of a dispute, please consult a practicing lawyer promptly.