A Research On The Circulation Of The Guarantee For Related-party

It is so called that relation guarantee referring to the guarantee providing the performance to its creditors for the debts of the relation parties such as shareholders,actual controllers,directors and senior management personnel.The regulation of relation guarantee originated from the Company Law in 1993.It was highly debated that the Article 60 of that prohibiting directors and managers from providing company assets to others;thus it is whether the company has the ability to guarantee or not.It is gradually disappearing until the legislation of the Company Law in 2005.The current Company Law basically conforms to the regulation of relation guarantee with that Company Law of 2005.According to the provisions of Article 16 of the current Company Law,the shareholders' meeting should make a resolution if the company provides guarantee for shareholders or actual controllers.Moreover,the resolution should be composed of the articles of association of the company in the shareholders' meeting and the board of directors should determine one another and the shareholders would apply the voting power elimination mechanism while making resolutions on the guarantee if the company provides guarantee for other relation parties.The company law should control the relation guarantee although it gives the company the right to provide external guarantee.The associated parties in the current law appear to be restricted to the shareholders and the actual controller if it is strictly in accordance with the context.The company law has no difference from the general body for other relation parties.It is inconsistent that making the resolution rules for associated guarantee and suggesting that legislation broadening the scope of relation parties in relation guarantee.The Company Law focuses the security right on the shareholders' meeting in order to prevent relation guarantee,but it affects the flexibility of the guarantee to a certain extent.It is suggested that the company should be authorized to give the manager a certain range of security rights in the articles of association.The Company Law also does not deal with the specific causes of the guarantee of the main debt.It is prohibited from providing guarantee for the debt incurring by the relation party due to the repurchasing of the company's equity.Last not the least,there are some problems in unclear validity of the contract that violating the law regarding the legal regulation of relation guarantee.According to the provisions of the current law,the guarantee provided by companies to related parties must be decided by the organs determined by the articles of association.Without the authorization from the competent authority,other entities shall have no power to provide guarantees on behalf of companies.Because Article 16 of Company Law does not clearly stipulate the legal consequence of violating this Article,there is quite large controversy in practice.The views of judicial adjudication vary,while the theoretical circle also does not reach an agreement on the validity of such kind of guarantee contracts.In related-party guarantees,the relative party has duty to examine whether the company has a valid guarantee resolution,and his duty is limited to formality examination.When the relative party performs his duty of examination,his trust interests should be protected by law.If he fails to fulfill the duty of examination,there is no trust interest worthy of protection,but his action cannot be regarded as malicious.From the perspective of fairness,the contract shall be deemed invalid and the parties shall bear the legal consequences of invalidation of the contract according to their own fault,and shall not assign the adverse consequences to the relative party.In addition,in the aspect of the legal regulation of the related-party guarantee,in addition to the unclear effect of illegal contracts,some other problems that the resolution rules are not unified,the flexibility is not enough and the inconformity of the regulation of share repurchase control rules of share repurchase need to be improved correspondingly.