| Corporate guarantees is one of the powers of corporate, which shall consists of corporation's business conduct. As a result of business's freedom to involve in any business affairs, it's at a corporation's option whether and how to guarantee for others. Nevertheless, there're limitations upon this freedom– both internally and externally. The internal limitation requires a corporation shall make its guarantee decision on its own and for its own sake. The external limitation justifies the administration's restriction on the corporation's power and is derive from the protection of minority holders. In China, corporate guarantee frequently be misused as a tool to deprive of corporation asset due to the existence of one single large shareholder in the company. Therefore, corporate guarantee shall be well restricted while at principle recognizing it as the freedom of the company.The legal effect of corporate guarantee is the embodiment of the aforementioned combination of freedom and restriction. As far as this effect problem is concerned, it must clarify that Article 16 of PRC Company Law is bound to observe. It must also be clear that outsiders shall observe what the articles of association says on this matter. In the event that no regulation is made on this matter in the articles of association, whether the corporate guarantee is legal one depends on whether the decision is made by the company itself. If the decision is made by the institute which have no power to make such decision, the corporate guarantee then made is illegal thus have no legal effect at all. In addition, the creditor shall bear the obligation to literally review the relevant resolution at issue.This paper is structured in the way as following: firstly, clarify the theoretical framework of corporate guarantee; secondly, explore the advantages of foreign legislation on the same topic; thirdly, interprate Article 16 based on aforementioned analysis; at last solve some practical problem by way of a case study. |
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