Research On The Unauthorized Guarantee Of Corporate Legal Representative

The issue of ultra vires guarantees by the legal representative has been troubling the corporate law community.As Article 16 of the Company Law of the People’s Republic of China（hereinafter referred to as the Company Law）does not specify the legal consequences of ultra vires guarantees,it has led to a situation of divergence in theory and confusion in judicial decisions.The Interpretation of the Supreme People’s Court on the Application of the Civil Code of the People’s Republic of China Concerning the Guarantee System（hereinafter referred to as the Civil Code Guarantee Interpretation）continues the view of the statutory limitation statement of the Minutes of the National Conference on Civil and Commercial Judicial Work of the Courts（hereinafter referred to as the Nine Civil Minutes）,and clarifies that ultra vires guarantees are subject to the provisions of Article 504 of the Civil Code of the People’s Republic of China（hereinafter referred to as the Civil Code）,and makes changes and improvements in logic and details,but there is no positive and clear response in terms of the understanding and application of Article 16 of the Company Law and Article 504 of the Civil Code),the criteria for determining good faith,and the liability for invalid guarantees,and it is necessary to explain the above issues so that the external guarantee system can be logically self-consistent and achieve balanced protection of the interests of all parties.First of all,to discuss the issue of the legal representative overstepping his powers requires an understanding of the boundaries of the legal representative’s powers.This paper explores the connotation and boundaries of the representative’s powers from the starting point of the development of the legal representative system in China,to dispel the long-standing misconception that the legal representative is the hand of the company and that the representative’s powers are unrestricted.The authority of the legal representative is not omnipresent and is subject to restrictions from the law and the company’s articles of association and resolutions.According to the provisions of Article 16 of the Company Law,it is clear that the legal representative does not enjoy the authority of the company’s external guarantees,and that irregular guarantees constitute an ultra vires representation.Secondly,to sort out the evolution of the legal representative ultra vires guarantee system and the adjudication path.From the strict restriction of company guarantee to the autonomy of guarantee by authorised statute and then to the adjudication idea of determining the ultra vires representative,the company guarantee system has gone through a tortuous process of change.The external guarantee itself involves many subjects of interest,and the game and conflict are fierce,leading to the legislator and the adjudicator in the balance of interests to make a difficult choice.With the promulgation and implementation of the Civil Code,the adjudicative idea of statutory limitation of representation was gradually established,requiring the counterparty to assume a reasonable duty of review,and the rules on the effectiveness of ultra vires guarantees moved towards unification.Then,reflecting on the ultra vires representation system and related rules established in the Interpretation of the Civil Code Guarantee,the argument for statutory limitation of representation is still flawed due to the lack of clarity on the limits of the legal representative’s power in China’s Company Law.Combined with the analysis aided by data from the Supreme Court’s judicial decisions,it is found that even under the interpretive theory of limitation of representation,the standard of the duty to reasonably examine the relator is not yet clear,and the legal consequences and liability mechanism when the relator is not acting in good faith are not very reasonable.Finally,it is suggested that the rules for determining the effectiveness of the legal representative’s ultra vires guarantee be improved.It is suggested that the Company Law should clearly limit the right of representation of the legal representative,which can be based on the introduction of the "normal business rule" in the common law;clarify the general review obligation,introduce flexibility factors,and specifically analyse the good or bad intention of the counterparty on the basis of the general review obligation;clarify the application of the no-authority agency rule by analogy when the counterparty is not in good faith,and the ultra vires guarantee act The company will not be liable for the guarantee and will not be liable for contractual negligence.