Research On The Legal Issues Of The Company’s External Guarantee

With the rapid development of China’s commercial economy,guarantee has become an important way to finance the company’s business activities.Article 60 of the Companies Act 1993 prohibiting companies from providing security to the outside world,was replaced by article 16 of the Companies Act 2005(hereinafter referred to as article 16),which provides for companies to provide security to the outside world;the Companies Act 2014 continues to apply this provision.Although the general provisions of the company’s external guarantee are clearly defined in law,the academic and practical circles are quite different because there is no further expression on the nature of the provisions stipulated in article 16,the way to realize the legal effect of the company’s external guarantee and the legal effect of the legal representative’s ultra vires external guarantee.This paper mainly studies the legal problems of the company’s external guarantee,through three typical cases,analyzes the legal problems existing in the case,extracts the dispute focus,then analyzes from the perspective of the academic and practical circles,and finally returns to the case to put forward suggestions on the dispute focus.The first part,the case description and the focal question.Through analyzing three cases of Chongqing Zanli case,Hebei dedicated guarantee case and Mingxin Daily Chemical case,three dispute focal points are concluded.The first is how to define the legal nature of article 16,the second is how to judge the legal effect of external guarantee,and the third is how to judge the legal effect of legal representative’s ultra vires external guarantee.In this paper,Chongqing Zanli Court considers that Article 16 should be a mandatory regulation of management,to regulate the internal procedure of the company,and the ultra vires behavior of the legal representative does not affect the validity of the contract although thecounterpart doesn’t review it.Hebei Professional Guarantee Court holds that the opposite party has the review obligation.In judging the legal effect of the ultra vires external guarantee,it can not only rely on Article 16,but also combine with Article50 of the contract law to investigate,so as to determine that the company does not bear the guarantee responsibility.The court of Mingxin daily chemical case held that Article 16 is an arbitrary norm,and the failure of the opposite party to fulfill the review obligation will not lead to the invalidity of the contract.The legal representative ultra vires external guarantee and signing and sealing is legal representative behavior,so as to determine the validity of the guarantee contract.The second part,legal analysis.In view of the first dispute focus,this paper first starts from the nature of the company’s external guarantee legal norms differences,refines the different views of scholars.And through analysing legislative purposes and value,this paper considers that article 16 is a regulatory mandatory norm which seems more reasonable;In view of the second dispute focus,this paper first sets out from the divergence of the realization path of the legal standard of the company’s external guarantee,respectively,the normative qualitative path,internal norms path and othe judgment path combined with the "contract law" article 50 or other applicacble law,and then analyzes these three paths,this paper considers that the third path is more suitable to judge the legal effect of foreign guarantee of our company;In view of the third dispute focus,this paper starts from five different viewpoints of the legal representative’s ultra vires external guarantee legal effect,secondly analyzes the legal representative’s authority and behavior,finally determines the legal effect of the ultra vires guarantee.The third part puts forward the suggestions of enlightenment.This paper holds that the reason of the above-mentioned disputes is the deficiencies in legislation,judicature,relative person and company,thus it is necessary to clarify the legal nature of article 16 from the legislative level and to increase the legal consequences of the violation;Secondly,construct the appropriate rules for judging the legal effect of the company’s external guarantee from the judicial level and make use of guiding cases of the Supreme Court;Thirdly,clarify the legal effect of the external guaranteewhen the relative person is malicious and the obligation and limits of the relative person’s examination from the relative person’s level;Finally,consummate the provisions of the company’s articles of association,establish the system of the company’s guarantee and the publicity of the articles of association,and strengthen the internal supervision and punishment mechanism.