Defective Establish A System

Corporations as a fundamental part among market transactions are playing a key role in social and economic development. However, incorporators may well go against laws and regulations no matter they are loose or strict and the incorporation is intrinsically flawed, which would undoubtedly result in uncertainty to interests of everyone concerned such as the corporations, the shareholders and the creditors. Corporation laws therefore should establish a system to deal with those substantial or procedural flaws inherent with the defective incorporation and the system should focus on safety and efficiency of transactions.The two major law systems have accomplished theories and institutional arrangements in this regard. The Civil Law in principle denies the legal personality of defective incorporation, while traditionally the Common Law granted the legal personality to these corporations either basically or conditionally but now it is inclined to basic acknowledgement.Unfortunately, our new Corporation Law does not pay sufficient attentions to this issue. Instead, the law only has some rough and fragmentary stipulations, and is defective with the following problems: ambiguity about existence of the legal personality of defective incorporation, too narrow a scope of defect, lack of liabilities of related parties, and etc. To promote protection of business efficiency and interests of corporations, shareholders and creditors, we taking advantages of the two major law systems should clearly admit validity of defective incorporation and furthermore perfect the institutional arrangements including remedy of defective incorporation, compulsory dissolution of corporations concerned and incurred civil liabilities.This article contributes in the below several aspects. First of all, it elaborates the inevitability of occurrence of defective incorporation and then makes clear the necessity of establishing the corresponding legal...