This research paper aims to review and compare the solutions regarding Contracting with Oneself as found in Switzerland and Hong Kong. In a first part, the paper provides a definition of the term ”Contracting with Oneself”. The second part investigates the different solutions of Switzerland and Hong Kong.
Conflict of interests is regarded as a ”cross-cutting problem” of corporate governance and has been defined as a ”situation in which an individual or a corporation (either private or government) is in a position to exploit a professional or official
capacity in some way for their (or that of a related party) personal or corporate benefit”. Due to the negative effects on a company in general, conflict of interests need to be avoided.
There are many situations where a conflict of interests may arise. Contracting with Oneself is one of them and is very closely related to the definition as provided above. Contracting with Oneself, like conflict of interests in general, could be for the advantage but also for the disadvantage of a company and therefore, as it has been correctly described ”may not, in and of itself, be an evidence of wrongdoing”.
However, the problem of Contracting with Oneself is inherent as it could be misused for diverting company’s assets to a specific person (e.g. ”executive perquisites, excessive compensation, transfer pricing, appropriation of corporate
opportunities”, etc. The question in this regard is how Contracting with Oneself can be addressed by law and regulation and how to find the golden path between allowing it, if it is for the overall benefit and when and how to restrict it, if it has a negative effect. Additionally, the restrictions must be effective before Contracting with Oneself becomes a legal problem that may lead to a personal benefit of a specific person.
Table of Contents
1 Introduction
2 Definition of Contracting with Oneself
3 Contracting with Oneself in Switzerland
3.1 General Principles and Legal Foundation
3.2 Rules for Admissability of Contracting with Oneself
3.2.1 Transactions based on Authorization or Consent of a Superior Body
3.2.2 Transactions for the pure Benefit of the Principal
3.2.3 Transactions for Settling an Obligation
3.2.4 Transactions with a Market Price
3.2.5 Transactions amongst Group Companies
4 Contracting with Oneself in Hong Kong
4.1 General Principles and Legal Foundation
4.2 Rules for Admissability of Contracting with Oneself
4.2.1 Conflict Rules
4.2.2 Consent
4.3 Transactions in breach of Conflict of Interests
4.4 Admissability of Contracting with Oneself
4.4.1 Transactions amongst Group Companies
5 Conclusion
Research Objectives and Themes
The primary objective of this research paper is to provide a comprehensive comparative analysis of the legal frameworks governing "Contracting with Oneself" (Self-Dealing) in Switzerland and Hong Kong. The work investigates how both jurisdictions address the inherent conflicts of interest arising when individuals with authority conclude transactions with themselves or entities in which they hold personal interests, aiming to identify the balance between corporate flexibility and necessary regulatory restrictions.
- Legal definition and scope of "Contracting with Oneself"
- Comparative analysis of Swiss and Hong Kong corporate governance regulations
- Mechanisms for disclosure, authorization, and consent in self-dealing transactions
- The role of court practice and "no conflict" principles in corporate law
Excerpt from the Book
Definition of Contracting with Oneself
One of the core principals in corporate laws around the world is the fact that corporations have a legal personality and legal capacity. In other words, they are separate legal entities which means that they are separated from their shareholders or investors and they are responsible for their own debts. However, in daily life, corporate directors, willingly or unwillingly, tend to disregard this separation and as a result, may think that the assets of the company forms part of their private wealth.
The term "Contracting with Oneself" includes "Self-Dealing and Double Representation". Whereas the term "Self-Dealing" refers to a situation where "a person with authority concludes a transaction with himself", the term "Double Representation" is defined as a situation where a "person with authority represents both sides of a transaction". However, Contracting with Oneself can also occur between persons and companies that are "closely related to" each other. For the purpose of this paper, Contracting with Oneself is defined as being a transaction between:
• "the company and a director";
• the company and a third person (provided the "the director has a "personal interest" in the welfare of the" third person);
• the company and its subsidiaries; and
• the company and a third legal entity (provided the "the director has a "personal interest" in the welfare of the" third legal entity).
Summary of Chapters
1 Introduction: Defines "Contracting with Oneself" as a critical corporate governance issue and outlines the research objective to compare Swiss and Hong Kong legal approaches.
2 Definition of Contracting with Oneself: Establishes the theoretical foundation of corporate legal personality and defines the sub-categories of Self-Dealing and Double Representation.
3 Contracting with Oneself in Switzerland: Examines Swiss statutory laws (CO), the influence of the Swiss Supreme Court, and specific categories of permissible self-dealing transactions.
4 Contracting with Oneself in Hong Kong: Analyzes Hong Kong's legal framework, including the Companies Ordinance (CLO), the "no conflict" duty, and regulatory disclosure requirements.
5 Conclusion: Synthesizes the findings, noting the structural similarities in how both jurisdictions treat self-dealing while highlighting differences in their legislative and regulatory approaches.
Keywords
Contracting with Oneself, Self-Dealing, Double Representation, Corporate Governance, Switzerland, Hong Kong, Conflict of Interest, Swiss Code of Obligations, Companies Ordinance, Fiduciary Duty, Board of Directors, Shareholder Remedies, Legal Comparison, Disclosure Requirements, Corporate Law
Frequently Asked Questions
What is the primary subject of this research?
The research focuses on the legal challenges and regulatory frameworks surrounding "Contracting with Oneself," commonly known as self-dealing, within corporate environments in Switzerland and Hong Kong.
What are the central themes of the work?
The central themes include the definition of self-dealing, the fiduciary duties of directors, the "no conflict" rule, mechanisms for conflict disclosure, and the validity of transactions concluded under potential conflicts of interest.
What is the primary research goal?
The goal is to perform a comparative legal analysis to determine how two distinct jurisdictions (Switzerland and Hong Kong) balance the risks of asset diversion with the practical necessity of corporate business operations.
Which methodology is employed?
The paper utilizes a comparative legal analysis, reviewing statutes, relevant codes (such as the CO and CLO), court decisions, and legal doctrine from both jurisdictions to draw parallels and identify differences.
What does the main part of the paper cover?
The main part provides an in-depth examination of Swiss and Hong Kong laws, detailing specific legal provisions for permissible self-dealing (e.g., market price transactions or group company dealings) and the requirements for approval/consent.
Which keywords characterize the work?
Key terms include Self-Dealing, Corporate Governance, Conflict of Interest, Fiduciary Duty, and Comparative Law.
How does Switzerland handle cases where all directors are conflicted?
In Switzerland, if a conflict affects all directors, the approval of the general assembly, as the highest corporate body, is typically required to authorize the transaction.
Does Hong Kong law explicitly prohibit all self-dealing transactions?
No, Hong Kong follows a "no conflict" rule as a general principle, but like Switzerland, it permits exceptions where a conflict is not present or where the principal has provided informed consent, subject to disclosure requirements.
What role do the "Model Articles" play in Hong Kong's self-dealing regulations?
The Model Articles provide guidelines for disclosure to the board. While they clarify procedures for voting in conflicts, they do not directly address total board conflict, necessitating oversight from the general assembly in such instances.
- Arbeit zitieren
- Martin Grod (Autor:in), 2015, Corporate Self-Dealing. A Legal Comparison between Hong Kong and Switzerland, München, GRIN Verlag, https://www.hausarbeiten.de/document/333734
