Research On The Company 's Legal Form

Company legal form refers to the existence form of company as the major part of socialrelationship framed by law; it not only refers to the external responsibility relationship ofcompany and shareholder, but also refers to the internal economic structural arrangement ofcompany; therefore, it’s the core issue of company law. With economic globalization andrapid modernization of company law, modifications in company based on the change andinnovation of company legal form happened in many countries in order to take lead in thecompetition of economy and system. To be the key issue in the revolution of company law,company legal form has the butterfly effect in the action of company law. This paper takescompany legal form as research object; and demonstrates its related issues in a systemic andthorough way through integrated applications of logical analysis, historical analysis,comparative analysis, legal philosophical analysis and legal economic analysis; makesassumption of the basic concept and principal of company legal form setting based on above;and finally provides feasible and operable suggestions for the improvement of company legalsystem in our country. The paper consists of six major parts apart from the introduction andconclusion:The first chapter is to figure out the logical foundation of company legal form, tore-understand the implication of company’s independent personality, and to revise thetraditional company organization theory. From the perspective of company, comparing tolegal person negative theory, legal person positive theory is more reasonable and suitable forthe needs of development of modern market economy. However, to have independent legalpersonality in company doesn’t lead to the fact that the shareholder should take limitedliability, the two doesn’t have a causal relationship. From the facts of historical development,function of system, the legislative demonstration, it is already demonstrated that it’s not thedesired result for the independence of legal personality to let the partners take limited liability;the limited partnership of company could be limited liability, unlimited liability, joint andseveral liability and other new forms of liabilities. The essence of company legal personalityindependence should be based on the establishment of rules, and is summarized in threeaspects: the specialization of external representation, systematization of formal expressionand integration of external liabilities. Because of that, the independent legal personality should not be the criteria to distinguish between company and partnership. Besides that, interms of company association, the coincidence between company and association is a result ofspecial historical effect; there’s more advantages for partnership investment than individualinvestment under certain political and economic environment. However, it doesn’t impliesthat company has the property of association, nor does it means that association is theessential attributes of company. The number of shareholders could be one of the standards tomake internal categorization of company legal form, but it’s not the factor of extensiondefinition of company legal form. Company could be regarded as the organization of massgroup, but the property of that should be understood in the setting of all participants incompany.The second chapter studies the historical transformation of company legal form withseparations of western and Chinese transformation process, and tries to find the driving forceof company legal form transformation. In west, at the pre-mature stage of company, there arebusiness forms like the guild, domestic system, commenda, societas, and is the predecessor ofall kinds of company legal forms in later period. Modern time is the key period in companyform transformation history, and is the time for the birth of different company legal form suchas unlimited company, joint company, joint-stock company and limited company. Withprogressions of several social and economic revolutions, company legal form in the modernstage is under diversification development. In our country, the early form of company isgovernment-supervised and merchant-managed; and there’s no company from in real senseuntil the “company law” enacted in late Qing dynasty. From then on, every transform incompany legal form in our country happened under the enacting of government company lawwhich was based on the west company legal form. There was time when five types ofcompany legal forms co-exist, but after the founding of P.R.C, only two basic types ofcompany legal forms: limited company and incorporated company, is admitted by government.From the historical studies, the driving force of company legal form transformation comesfrom three factors: first, business practice conflicts with legal system. Free business practicecreates different company forms, and is admitted by law to become different company legalforms. They should be continuously examined and modified by business practice until beenabolished. Second, the integration of objective necessity and subjective initiative. Under theeffects of inheritance mechanism, because of the constrain of asymmetric information, thetransformation essence of company legal form has the objective necessity which should not be changed by the will of participants; however, under the effect of variance system, withinfluence from costs, the transformation of company legal form is under the process ofdynamic updating. Third, the joint work of economic foundation and superstructure. Thecontinuous development of commodity economy is the major driving force of company legalform transformation; at the same time, factors of superstructure, such as politics, regions,culture and traditions, play major roles in the transformation process.The third chapter focus on the classification model of company legal form; by studyingthe classification models of management structure and form of liabilities, to understand thedifference between different classification models, and to draw inspiration of the settings ofcompany legal form. Take management structure model, the classification of public company(public corporation) and private company (closed corporation) in England and America is atypical example. Take form of liabilities model, unlimited company, joint company,incorporated company, limited partnership company, limited liability company is civil lawcountries is a typical example. Among above, the situation in Korea and Japan is a bit special:in early stage, they presents the model of management structure, and when introducing a lotof company law from England and America, they gradually transformed into mixed model.Through comparison, it’s not hard to find out that in the classification of company legal form,one model uses substantial standard of classification, while the other uses formal standard.With different factors been addressed, the difference in the classification model of companylegal form directly affects the basic structure and property specification configuration ofcompany law, which lead to the effectiveness of company being as the foundation of judicial.To effectively respond to all kinds of competition brought by the diversified development ofcompany legal form, it is crucial to solve the problem of transplantation and localization ofcompany legal form. It should follow two basic requirements: first is core value, second isintegration with local practice.The fourth chapter is to surmise the basic concept and principal of the setting ofcompany legal form, and provide guidelines for the reformation of company legal form. Baseon the position of liberalism, company is an enlarged individual; and in order to maximize thepersonal profits of shareholders, theory of shareholders’ priority and concept of centrality ofshareholders’ board is established. While based on the position of communalism, company isthe reduced society; and in order to provide profits for common wealth, stakeholder theoryand concept of board of director board is established. As a matter of fact, the individual and society argument of company were in the state of dialectical unity, there’s no absoluteopposition between the profit of shareholders and common wealth of company. Under normalcircumstance, providing maximum investment profits for shareholders becomes a mosteffective way to improve general welfare for the company, and will not lead to functionaldisorder. But there will be different emphasis points in different kinds of company legal forms.In order to make company legal form fulfills the requirement of modern market economy,four basic principles should be follow during the legislation of company form by legislativecouncil, which are benefit priority, limited autonomy, design of distinguish and dynamicresponse. Among the four principles; the first two are targeted principles which to set the finalstate of company legal form; and the rest two are methodological principal which sets ways torealize final state of company legal form. It requires means of distinguish design and dynamicresponse to realize profits and autonomy when setting up the company legal form; the processis constrained by values such as fair and safety; and will reach an optimum equilibrium statebetween market economic needs and company legal form supplies through a dynamicprocess.The fifth chapter mainly examines the current system of company legal forms in China,gives extensive consideration of the related existing issues and explores the positioning ofspecial forms of enterprises in China as well. According to the existing Company Law andother relevant laws and regulations, the basic forms of company in China include limitedliability company, one-person company, wholly-state-owned company, company limited byshares, public company and foreign-funded company. Although great improvements havebeen made in legislation after amendments to the Company Law respectively in2005and2013, the adjustment of company legal forms is still not enough, which are evidenced by thefollowing facts. Firstly, the company legal forms are not clearly distinct. The name of thelimited liability company and that of the company limited by shares are overlapping in thesemantic sense and the standard of distinction are not substantive. Secondly, the classificationare too strict. The specific classification and the specific forms in each classification arestrictly statutory with no flexibility and autonomy. Thirdly, the effectiveness and efficiencyare limited. Mandatory rules are still widely existing for all aspects of the company legalforms, and are not dispositioned according to the features and functions of the company legalforms, leading to convergence of rules. Fourthly, the system of company legal forms is notsystematic enough. The identity of the shareholders are considered as one of the factors in the distinction of company legal forms, which is a strong reflection of administrative interference,and there are wasting of legislative resources and difficulties in application of law as threeforeign-funded enterprise laws and the Company Law exist in parallel. In addition, joint-stockcooperative enterprises and cooperatives, which are special forms of enterprises in our country,have the nature of a company to certain extent. It is advisable to integrate such forms ofenterprises into the scope of company legal forms after transformation in light of the specificsituations, or restore them to the original forms of enterprises in order to achieve properregulation effect based on the basic distinction.The sixth chapter summarizes and furthers prior research achievements. In this Chapter,the basic direction and specific path of the reform in the company legal forms in China isexplored in consideration of the analysis of the general external environment. The rapiddevelopment of the company legal forms in our country is attributed to the establishment ofthe socialist market economy system. Therefore, the transformation of company legal formsshall also depend on the conditions of the socialist market economy in the foreseeable future.As China’s economy is transforming from a market-based economy to a market-determinedeconomy, the system of China’s company legal forms shall be tested in the wave of economicglobalization in an undoubtedly more challengeable situation. Therefore, the general law ofinstitutional competition and development shall be followed in the new round of reforms,properly coping with the the relation between law implantation and law innovation anddeveloping in the direction of standardization, flexibility and structured distinguishment ofcompany legal forms in the legislation of company law. As for the specific path towardimproving the legislation, it is suggested that the following four aspects shall be considered.Firstly, the legislation in respect of company legal forms is to be unified to achieveconformity of the Foreign-funded Enterprise Law and the Company Law as soon as possibleand reestablish the private-law nature of the company law and cancel the form ofwholly-state-owned company. Secondly, the company legal forms shall be systematicallyintegrated based on substantive distinction, making a first-grade classification of thecompanies based on their public nature and a second-grade classification based on thestandard of going public or not. Thirdly, the scope of one-person company shall be enlarged,allowing the establishment of one-person company in the scope of non-public company forms,strengthening the proper combination of governance structure and the function of companyforms and decreasing the use of mandatory rules in company forms. Finally, a standing review committee shall be established to actively respond to the demands of the company’s economicpractice and an additional independent commercial court tribunal shall be established tostrengthen the effectiveness and efficiency of company-centered commercial trials.