Research On The Effect Of Articles Of Association

One of the major modifications in"New Company Law"is to strengthen the autonomy of companies, giving companies greater self-governing rights in all directions. Company Charter functions as one important mechanism to achieve corporate autonomy but before the advent of New Company Law, Company Charter had been playing little role in its legal function and people's consciousness to the company charter is of indifference. Company Charter is the basis for dealing with corporate disputes so a study on the validity of the company charter has theoretical value and practical connotation as well.According to the provisions of China "Company Law", Company Charter possesses dual identifications of both contract and self-governing norms. The effectiveness of Company Charter is derived from the company autonomy and national jurisdiction, between which the relations are of conflict and the coordination. Company Charter has both internal and external validity. The former is the premise and basis of the latter. After the establishment of company, the company charter is effective to the shareholders, while its effectiveness to the third person and the company itself arise from the time when the company is officially registered and approved. The revised company law has more detailed articles on the effectiveness of Company Chapter, especially on the internal validity of companies. In addition it has stipulated the corresponding legal responsibility for the violators. The numbers of arbitrary norms have increased. The above mentioned points are the highlight of New Company Law. Nevertheless, New Company Law is still deficient in some areas, such as incomplete specification on external validity, unclear relationship between peremptory norms and the terms of company charter. In terms of the defects of the effectiveness of the charter and the relief systems, it lacks significant breakthrough. Hence it entails further improvement.As the nature of Company Charter is the logical premise to solve the validity of the charter, scholars have put forward a variety of theories on the nature of the charter. Contract theory is well recognized in the common law countries. The validity of the charter lies in members'autonomy. After the company charter is agreed between the members and is approved by government, it takes effect between members thus the relationship with the company is established. To escape its constraints, the members can withdraw or transfer his/her shares at any time. That is the contractual nature of Company Charter. The theory of Statutory authority, however, negate contract theory as a legal contract between the shareholders, which argues that the effect of the charter is based on the institutional arrangements between members in the company, such as distribution of the rights and the obligations between the shareholders, directors, officers. The effect of the charter may cover the public in certain circumstances. The theory of statutory authority is the product of a specific identity and balanced rights. The theory of autonomy norms is well acknowledged as the nature of Company Charter. The theory claims that the initiators of the company are authorized by law to stipulate rules on the system of the organization and operation of the company in accordance with the principle of autonomy. Company charter functions as a law in regulating the internal and external activities to achieve the internal self-government. The author of this thesis agrees with this theory.The theoretical effectiveness of Company Charter lays its foundation on the coordination and balance between national power and corporate autonomy. The exercise of public power requires that the boundary of the national civil rights of the subject is tolerated within the limits of social order. Whereas the exercise of private autonomy requires that the civil subjects have rights to decide their own affairs to maximize their right. By means of designing company charter, the balance between national power and corporate autonomy is obtained. That is to say the country achieves the purpose of social control through the regulation and guidance of the company charter. The formulation of the specific content of the Constitution fully reflects the spirit of autonomy. This respect is particularly reflected in the various provisions of the charter. In other words, mandatory items reflect the government will while and company charter reflects the autonomy to the full play.Company charter takes effect at the time of registration and approval. Once the charter becomes established, it is effective to the shareholders, whose behaviors must be in line with the articles like investment amount, the mode of capital and other corporate regulations that the charter specified. Otherwise, they will bear the responsibility. If not giving the binding force of the charter before the registration of company, the mutual rights and obligations between the shareholders will lose the righteousness. The damages originated from the failure of establishment will be difficult to access to legal remedies. The effectiveness of company charter will become null and void when the company completes its historical mission and does not exist. Also, the special changes made by the meeting of shareholders or board of the company can be considered as a part failure of the effectiveness.The range of Company charter can categorized into two types of arbitrary and mandatory records, the ratio and the proportion between which depends on how to determinate of them in company charter. It is, factually, the result of the balanced national intervention and coordination of autonomy. The tendency of expansion of the recorded items in modern company law indicates that national legislative intervention toward corporate affairs has been converted to company autonomy in order to facilitate the company's flexible operation. The effectiveness of the company involves internal constitution, shareholders and the company management.The ineffectiveness of Company Charter refers to the objective situation that when company charter cannot meet the Effective elements so that it fails to take its full force. The defected company charter ranges from part defect and full defect. Part defect may lead to the invalid or the cancelable of company charter while full defect may lead to the invalid of specific articles even the null and void of the whole charter. Modern company law tends to dilute the elements of unaffecting company charter, adheres to the maintenance of the company and guarantees the existence of companies by adopting corresponding system.Due to the adverse effects bought about by the ineffectiveness of company charter, the authors of this thesis proposes to construct the legislatively relief system in order to rescue the effectiveness of company charter defects. Detailed ideas are as follows: First, in terms of the principle of legislation, coordination should be made to resolve the relationship between national public power and private autonomy. Transaction security should be ensured in the process of pursuing efficiency and the principal procedures of judicial relief should be polished. Second, the causes of invalidity of company charter should be specified and relief mechanisms should be established. Third, invalid charter procedures should be determined. Finally, a system civil liability should be classified in order to illustrate invalid charters.