Abstract

The separation of company ownership and management rights is a common practice for enhancing corporate governance within the modern enterprise system. The trend of "cannibalism" and loyal people, along with the development of the separation of powers, necessitates the establishment of a more standardized corporate governance mechanism for supervision. Therefore, accelerating the enhancement of the obligation system of corporate management will become an urgent problem to be addressed. Since the initial introduction of the "duty of diligence" in China's Company Law in 2005, its meaning has not been defined. This lack of clarity has created loopholes in judicial practice when determining whether a company's behavior violates the duty of diligence. While the current draft amendment to the Companies Act makes a breakthrough in Article 180 by defining the duty of diligence of directors and supervisors, the definition is still somewhat abstract. Therefore, in the subsequent revision process, the definition should be specific at the legislative level to enhance the diligence obligation of company management. This will provide clear legal guidelines for judicial practice to follow.