A business plan manuscript discovered on the company's computer has sparked a million dollar compensation lawsuit. Does it violate the duty of loyalty for company management personnel to conspire to establish similar business companies during their tenure? Can it be considered as' malicious solicitation 'for more than ten employees to join a new company collectively after leaving? How to determine if the original company has been damaged when former executives are accused of quietly incorporating business opportunities into the new company's portfolio? How can the law accurately define "who is an executive" and "whose opportunity is this?" Recently, the People's Court of Tongzhou District, Beijing, concluded a dispute over liability for damaging company interests caused by the resignation of an executive. In 2023, Pu Company, which was deeply involved in the field of energy storage batteries, encountered a "desperate battle". Huang, who had previously served as the company's president, claimed to be ill and submitted his resignation to the company. Former R&D director Hu, former business assistant to the president Ma, and 19 employees who had previously worked in Pu Company's R&D, engineering, sales, and other positions also resigned and joined Green Company, which had a highly overlapping business scope with Pu Company. What alerted Pu Company was that Hu was the sole shareholder of Lv Company when it was established, serving as the company's executive director and legal representative, while Ma served as the company's financial director. The commercial projects that Pu Company had previously focused on promoting were also listed as application cases in Lv Company's promotional materials. Pu's company subsequently launched an investigation and found that before Hu resigned, there were relevant documents in his office computer preparing to establish Green Company, and there were annotations from Huang; At the same time, it was found that Huang held a handwritten business plan draft with the title "Green V" similar to the name of Green Company, and the plan content also matched the development path of Green Company. Based on this, Pu Company filed a lawsuit to the court, accusing Huang, Hu, and Ma of conspiring to establish Green Company to operate similar businesses during their tenure, violating the duty of loyalty of executives. At the same time, the four defendants were accused of usurping Pu Company's business opportunities in Xiangyang, Hubei and Chengde, Hebei, maliciously recruiting employees to join, and seriously damaging the company's interests. They demanded joint and several compensation for economic losses of 30 million yuan. Huang argued that he did not participate in the operation of Green Company and resigned due to health reasons and disagreements with the board of directors; Hu and Ma denied their executive status and advocated for legitimate entrepreneurship after resignation; Green Company emphasizes that it has never sought business opportunities that belong to Pu Company, and that employee job hunting is a personal career choice, without any malicious solicitation behavior. The court is trying whether Hu, as the former R&D director, and Ma, as the former assistant to the president, have the status of senior management personnel of Pu Company? The court believes that although Hu is named as the R&D director, his specific R&D work can be vetoed by others, and he needs to report progress to superiors every week. His management targets are limited, and he is essentially a middle-level personnel who focuses on technology, not a senior management personnel who enjoys strategic decision-making power in the sense of company law. As the assistant to the president, Ma is engaged in administrative reception and administrative work. Although he has access to some of the company's systems, his authority stems from administrative support needs and he does not participate in the company's management. Therefore, Ma does not have the status of a senior management personnel. Did Huang, Hu, and Ma violate the fiduciary duty of company executives and cause losses to Pu's company? For Hu and Ma, as ordinary employees, they do not have the loyalty obligation set by the Company Law for senior management personnel. For Huang, who was once the president of Pu Company, the court held that Huang was responsible for the overall work of Pu Company and was a senior executive of Pu Company. During his tenure, he was required to fulfill the duty of loyalty as a senior executive. The investigation of the facts in this case shows that Huang, as a senior executive, planned and participated in the establishment of a competing company with Hu and Ma during his tenure, which indeed violated his fiduciary duty to the company. However, there is no evidence to prove that Huang joined the company Green and obtained equity appreciation income. Therefore, the court cannot support Pu's lawsuit request to exercise the right of attribution of equity appreciation income to Huang in the company Green. During their tenure, Hu and Ma prepared for entrepreneurship after leaving their jobs. Although it did not comply with professional ethics, the law did not explicitly prohibit it, and Pu's company has waived their non compete restrictions. Therefore, they should not be liable for compensating Pu's company for the establishment of Green's company. In response to Pu's claim of seizing business opportunities, the court believes that the protection of business opportunities requires the company to form clear expected benefits and have the ability to develop economically. The court determined that the Xiangyang project is a business opportunity that Pu Company has invested substantial efforts in, and Huang, as a senior executive, is not allowed to pursue this opportunity. But the project has not yet completed the bidding process, and Green Company has not actually obtained the opportunity, so it does not constitute usurpation. As for the Chengde project, it does not meet the legal criteria for identifying business opportunities due to the lack of a clear name and project content. In response to the situation where 19 employees collectively joined Green Company, the court held that the knowledge, experience, and skills accumulated by the employees in their work are an integral part of their personal labor ability. The above-mentioned employees resigned normally without being required to fulfill non compete restrictions, and their right to freely choose employment should be protected without infringing on trade secrets. Green Company did not violate relevant legal provisions when recruiting the above-mentioned employees. Based on this, the court ruled to dismiss all of Pu's lawsuit requests. The judgment has been upheld in the second instance and is now effective. The judge's statement, accompanied by the implementation of the newly revised Company Law, highlights the value orientation of strengthening the integrity obligation of controlling shareholders, preventing conflicts of interest, and enhancing governance efficiency in China's grand blueprint for promoting the modernization of corporate governance. This case has typical significance in clarifying the boundaries of senior management personnel who have a fiduciary duty to the company, identifying the legal scope of opportunities and talent mobility for the company. Who are the company executives? Title is not the only criterion. According to Article 265 of the Company Law, senior management personnel refer to the manager, deputy manager, financial officer, secretary of the board of directors of a listed company, and other personnel specified in the company's articles of association. Under normal circumstances, executives are not allowed to take advantage of their position to seek business opportunities belonging to the company for themselves or others, nor are they allowed to engage in self operated or operated businesses similar to those of the company they work for. Otherwise, the income obtained must be attributed to the company. Given that the Company Law imposes high loyalty obligations on executives and the serious consequences of violating these obligations, job titles cannot be used as the sole criterion for identifying executives. The core characteristic of company executives is to shoulder the responsibility of company management, understand the core business model and trade secrets of the company. Therefore, the identification of executives cannot be limited to the provisions of the company law and the records of the company's articles of association, nor can it be based solely on the content of the company's internal system compilation documents. It is necessary to conduct a substantive review of whether they actually have and have fulfilled the relevant powers of executives, such as reviewing whether they have actually exercised their management powers, whether they have significant decision-making power at the company level, and whether they are responsible for the overall business results of the company. In this case, although Hu served as the R&D director, he did not have overall decision-making power over the company's operations, and his management was limited to employees within the system R&D team; Ma is only responsible for basic work such as business reception and administrative affairs, without any management authority, and neither is a senior executive. Who moved 'my cheese'? The ownership and usurpation of business opportunities, as carriers of commercial interests, are closely related to the interests of the company. The Company Law of our country prohibits senior management personnel from taking advantage of their positions to seek business opportunities that belong to the company. The company claims that a business opportunity has been seized, and in addition to proving that the opportunity belongs to the company, it is also necessary to prove that the opportunity has been actually obtained by others. If the opportunity is still in the negotiation or bidding stage, and no definite expected benefits have been formed, and the company has no financial guarantee or private possibility, it does not constitute legal usurpation. In this case, the court recognized that the commercial opportunity of the Xiangyang project belonged to Pu Mou Company, because Pu Mou Company invested commercial resources in the project, facilitated the signing of a memorandum of cooperation and participated in technical design, and made substantial efforts, with clear and reasonable expected benefits. However, the project has never completed the actual bidding, and the so-called opportunity has not been converted into actual contractual benefits for either party. Although Huang's plan to establish Green Company during his tenure violated the loyalty obligations of executives, it is difficult to determine whether he seized the business opportunity from Green Company. Legitimate job search or malicious solicitation? The legal boundary of career freedom: The Company Law imposes strict loyalty obligations on company executives, prohibiting behaviors such as industry competition and seizing business opportunities. When the interests of executives conflict with the interests of the company, the interests of the company must be prioritized and their own interests must not be placed above the interests of the company. But for ordinary employees, they are only responsible for the confidentiality and integrity obligations stipulated in the labor contract. During their employment, they prepare for entrepreneurship after leaving. If they do not violate legal or contractual obligations, the law does not prohibit them. As workers with learning abilities, the knowledge, experience, and skills possessed by employees are part of their personality and the foundation of their survival and labor capabilities. Employees have the freedom to independently utilize their own knowledge, experience, and skills after leaving the company. Except for cases of infringing on the original company's trade secrets, it does not violate the principles of honesty and credit and recognized business ethics. The free flow of talent is also conducive to social innovation. In this case, 19 resigned employees joined other companies in the same industry as a legitimate career choice, provided that they did not violate non compete restrictions or infringe on trade secrets. Labor creates value, freedom ends at harm. All parties should act within the legal framework, adhere to the principle of good faith in participating in market competition, and jointly maintain a healthy and orderly business environment. Contribution: Beijing Tongzhou Court (Xinhua News Agency)