Corporate Self-Dealing. A Legal Comparison between Hong Kong and Switzerland

Research Paper from the year 2015 in the subject Law - Comparative Legal Systems, Comparative Law, grade: A-, The University of Hong Kong, course: LL.M, language: English, abstract: 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.