Health Management Company v. Hu: Supervisor Non-Compete and Harm to Corporate Interests
In a corporate-governance typical case, the Wuxi Binhu court explained that a supervisor owes duties of loyalty and diligence, and that the supervisory function means the supervisor may not operate or help operate a competing business because that would inevitably create a conflict with the company's interests. In this case, the supervisor took over a nearby competing studio without completing resignation procedures and diverted the company's trainees there; relying on Article 184 of the new Company Law, the court treated the conduct as harmful to the company and ultimately induced compensation, closure of the studio, and a commitment not to continue the same business within a specified area.
Holding
In a corporate-governance typical case, the Wuxi Binhu court explained that a supervisor owes duties of loyalty and diligence, and that the supervisory function means the supervisor may not operate or help operate a competing business because that would inevitably create a conflict with the company's interests. In this case, the supervisor took over a nearby competing studio without completing resignation procedures and diverted the company's trainees there; relying on Article 184 of the new Company Law, the court treated the conduct as harmful to the company and ultimately induced compensation, closure of the studio, and a commitment not to continue the same business within a specified area.