On March 23, 2021, the first hearing of the first instance of a dispute regarding liability for harming a company's interests, which our firm represented, took place.

One of the key points of contention in this case is as follows: If a director privately establishes a company to divert business, yet does not directly hold shares in the new company nor is registered as an executive in the new company's business registration, can he evade the duty of loyalty and diligence owed to the old company?

We hold the view that although, based on business registration information, it cannot be determined that the director is a shareholder or an executive of the new company, matters such as financial reimbursements and salary disbursements of the new company are all approved by this director, and the director has also been interviewed in the capacity of the new company's chairperson. Considering the comprehensive evidence, it can be determined that the new company serves as an entity and a tool for him to seek business opportunities and interests of the old company. The director has breached the duty of loyalty and diligence to the company. He and the new company jointly constitute an infringement of the old company and should assume joint and several liability for compensating the losses of the company.