Liability for information disclosure by independent directors

By Arrow Zhang, Grandway Law Offices

Article 82 of the Securities Law (2019 Revision) stipulates that directors and senior executives of an issuer must give written confirmation opinions on the securities issuance documents and periodic reports; the board of supervisors of the issuer must examine the securities issuance documents and periodic reports prepared by the board of directors and issue written examination opinions; and supervisors must also sign written confirmation opinions.

Arrow Zhang, Grandway Law Offices
Arrow Zhang
Grandway Law Offices

Directors, supervisors and senior executives of an issuer must ensure that the issuer discloses information in a timely and fair manner, and the information disclosed is truthful, accurate and complete. If they cannot give such assurances, or have any objection, they must express their opinions and state the reasons in the written confirmation, which the issuer has to disclose. If the issuer refuses to do so, the directors, supervisors and senior executives may directly apply for such disclosure.

The new Securities Law established the legal basis for an information disclosure objection system. According to, since the implementation of the law at least 23 A-share listed companies have disclosed that their independent directors had abstained from voting or voted against the periodic reports because they could not guarantee their authenticity, accuracy and completeness. Those independent directors were never subject to administrative penalties or regulatory measures. This article analyses the administrative liability of the objection to information disclosure by listed companies and identifies the independent directors’ duties.


Independent directors are legally obliged to ensure timely, fair, true, accurate and complete information disclosed by listed companies. When they cannot do so, they must give their opinions and state the reasons after fully implementing the verification procedures. Therefore, the objection to information disclosure is not equal to merely stating non-fidelity.

The Measures for the Administration of Information Disclosure by Listed Companies (2021 Revision) clarifies that directors who are unable to warrant the authenticity, accuracy and completeness of the information disclosed, or who have objections, must cast a negative vote or abstain from voting and give their opinions, with the reasons stated during the deliberation of the board of directors.


It was made clear in the case of Shenzhen Sunrise New Energy that directors had the duty to verify content objected to and reflect this in the annual report. They should not take the audit opinions of the accounting firm and an inability to review the annual report as reasons for “non-fidelity” to avoid personal and joint liabilities for information disclosure.

According to the revision notes for the Information Disclosure Measures, the responsibility of independent directors for ensuring the authenticity, accuracy and completeness of periodic reports is not limited to expressing opinions, and whether they perform their duties faithfully and diligently will determine the ultimate administrative liabilities.

The Rules for Determining Administrative Liabilities for Illegal Information Disclosure asks for full consideration of “other circumstances” to decide administrative penalties, leaving space to verify the duties undertaken under complex circumstances.

Full implementation of the verification procedures, objection to information disclosure and prudent votes are conducive to being seen as independent directors thoroughly carrying out their duties. That is, the information disclosure objection system allows exemption from liability.


The prerequisite for independent directors to effectively participate in corporate governance is a complete understanding of the company’s operation. In the case of limited channels for obtaining information and restricted means of verification for determining whether they have been diligent and conscientious in their jobs, it is necessary to fully consider their access to information and verification procedures performed, as well as the conditions for independent due diligence.

Article 85 of the new Securities Law stipulates that if an information disclosure obligor fails to disclose information in accordance with regulations, or there are false records, misleading statements or material omissions in the announced securities issuance documents, periodic reports, interim reports and other information disclosure material causing investors to suffer losses in securities transactions, the obligor shall be liable for compensation.

The controlling shareholders, actual controllers, directors, supervisors, senior executives and other directly responsible persons of the issuer, as well as the sponsors, and the underwriting securities company and its directly responsible persons, will be jointly and severally liable along with the issuer, except for those who can prove that they are not at fault.

The Securities Law also stipulates that the imputation principle of directors’ liability is the principle of presumption of fault. That is, once information disclosure violations occur, directors are first presumed to be at fault unless they can prove that they have done their utmost to fulfil their duties.

However, tightening the moderate liability exemption will place ultimate accountability on all the directors involved with the no-fault liability principle, regardless of whether they are at fault. Once it happens, a deterrent effect will be exerted on the capital market to treat information disclosure seriously in the short term.

Still, in the long run, the constraints of the legal obligation of independent directors on information disclosure far exceed the incentive for them, which will gradually break the balance of the constraints and incentive mechanism and discourage them from performing duties, resulting in a surge in corporate governance costs.

However, the above-mentioned objective circumstances do not change independent directors’ guarantee responsibility. As trustees of all shareholders of listed companies, they should try their best to act honestly in the interests of their principals and minimise agency costs, which is their duty.

With the A-share market ushering in the era of “strengthened responsibility”, complete verification procedures, objection to information disclosure according to the law, prudent abstention or dissenting votes, and precise records of opinions and reasons in the minutes and resolutions are still the administrative obligations of independent directors.

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