Functions And Application Of Corporate Articles Of Association In Litigation

"Modern companies are a microcosm of the modern country" . The articles of association are the primary basis of existence and activities of a company as well as the fundamental norms of corporate conduct just as a constitution is to a state. Although it is self-evident that the articles are important to the normal operation of a company, they are always disregarded by companies in fact, the result which is contrary to the purpose of the creation of the articles. Most of articles used by companies are almost the same in form and substance and their provisions are quite generic rather than specific for a particular company. Some articles are even in conflict of applicable laws and regulations. The only approach to fulfill the functions of the articles as contemplated for its creation is to improve the applicability and practicability of the articles. Generally, the corporate articles contain four functions: the articles are a fundamental element for establishment of a company; the articles have the effect of declaration; the articles are the norms of internal conduct of a company; the articles are one of instruments used by state to regulate companies. The litigation functionof the articles is restricted in the lawsuit due to people' s diversified understanding of nature of the articles and the flaws in the provisions of the articles, thus impeding the tribunal' s efforts to solve corporate disputes by reference to the articles. This paper attempts to identify by using the method of comparable analysis the articles as the self-governing bylaws which may be used as evidence for claims and allegation of a party in any case relating to corporate disputes, or as causes against a hostile third party, or as effective basis for any judgment made by court. The articles' functions of proof, defense and governing in litigation will provide an alternative approach to tribunal in solving disputes. The effect of the articles shall not override applicable laws, thus the relationship between the articles and applicable laws shall be analyzed when the articles are applied to in judgment making. The priority shall be given to the application of the articles without prejudice to compulsory provisions of laws and regulations and public order. The judicial remedy is an important settlement mechanism to disputes arising out of performance of the articles. The following three principles shall be adhered to when using judicial remedies to verify the invalidation of the articles or to alter the articles: corporate internal remedies shall be exhausted; judges shall be reluctant to interfere and companies shall be exist.