Research On The Validity Of The Ultra Vires Security Of The Legal Representative

This article discusses the effectiveness of the legal representative’s behavior when providing guarantees in the name of the company internally or externally without authorization from the board of directors,shareholders’ meeting,or shareholders’ meeting.The revision of the Company Law in 2005 imposed procedural restrictions on corporate guarantees.For non related guarantees provided to other enterprises or individuals,resolutions shall be made by the board of directors,shareholders’ meeting,or shareholders’ meeting in accordance with the provisions of the articles of association.The related guarantees provided to shareholders or actual controllers must be resolved by the shareholders’ meeting or general meeting.However,due to the lack of legal effect elements,this clause lacks rule guidance in its application.There are three representative views in the theoretical community on the nature of this clause,and there are also three types of judicial decisions: effective,invalid,and undetermined effectiveness.This article focuses on the core controversial issues mentioned above and intends to analyze the effectiveness of the legal representative’s ultra vires guarantee in four parts.The first part is about the three theoretical differences applicable to ultra vires guarantee under Article 16 of the Company Law,as well as a summary of the current situation of judicial practice under the influence of these three theories.At the same time,the "Interpretation of the Guarantee System" confirms the explanatory path of the nature of ultra vires guarantee,The most important factor that affects the effectiveness of ultra vires guarantees under this theory is the obligation of the counterparty to review.The second part is to provide a specific analysis of the review obligations of the counterparty.This article argues that for a company,guarantee has a high risk coefficient but a low return rate.As a creditor,the counterparty’s guarantee behavior adds a layer of rights protection to their own rights and is not in a disadvantaged position.It is certain that the counterparty’s review obligation can balance the profits and risks of both parties,and the counterparty’s review obligation has theoretical legitimacy.The Interpretation of the Guarantee System has designated the object of review by the counterparty as the company’s resolution,and the review of the resolution involves the articles of association.Therefore,both the resolution and the articles of association should be the objects of review by the counterparty.The content of the review is to make a reasonable review of whether the decision-making body is qualified and whether the signature voting is qualified.The third part is an analysis of whether the company bears compensation liability under the invalidity of the contract,or whether the legal representative under the unauthorized agency bears personal responsibility,as the failure of the counterparty to fulfill the review obligation after affirming the review obligation does not constitute good faith and the signed contract has no effect on the company.This article believes that one responsibility cannot be applied solely,but rather the two theories should be applied comprehensively.Based on the theory of personal responsibility of the legal representative,a commercial judgment rule can be added as a pre procedure for cases where it is difficult to apply.In the judgment of this rule,an unauthorized agency system can be introduced,and the judgment standard is whether the company’s fault in the act of exceeding its authority has caused damage to the trust interests of the other party,providing causal force,to clarify whether the company needs to bear responsibility and how much proportion of responsibility it should bear.The last part is an analysis and optimization suggestions on the inadequate regulation of ultra vires guarantee behavior under the existing system.This paper analyzes the shortcomings of the rule system from three aspects: unclear accountability mechanism for legal representatives,unclear performance standards for review obligations,and unclear legal effects of non goodwill of counterparties.Finally,optimization suggestions are proposed to address these shortcomings.