On The Legal Analysis Of Defective Incorporation

In view of the important status of the establishment of corporation, the valid foundation of a company would not only guarantee the legal status , but also convey the internal and authentic information to the counterparty so as to protect their corresponding rights and interests from suffering damages because of the corporate establishment. After its establishment, the corporation, as a legal subject, shall acquire the capacity for civil rights and civil conduct correspondingly in according to the law, and bear the corresponding civil liabilities, administrative liabilities and even criminal liabilities in civil activities. However, it is very difficult for the legislation to implement the original intention of the corporate establishment in practices. Although the new company law has been modified a lot compared with the old one, the issues concerning defective incorporation has hardly been inferred, which shall tamper the understanding and operation of the defective incorporation in judicial practices.Now the reduction of the registered capital required in the new company law has raised private investors'enthusiasm of setting up companies. However, without standard of the corporate establishment and the morbidity of the corporate law shall result in such defects as the subject qualification of the promoter, about the prescription for capital and about the establishing process, which shall directly affect company's effective establishment. Through the analysis of the causes of defective incorporation, the list of various cases about defective incorporation that occur during the establishment of corporation, and the comparative study of the settlement model and legal provisions about the defective incorporation in two legal system, author probes into the rectifying measurements so as to ensure the existence of the company's legal qualification, protect the stability of social transactions, and avoid the waste of social resources that results from the arbitrary revocation of the company. The rectifying measurements of defective incorporation shall not relieve the corresponding liabilities of the promoter thereof. If the defective establishment caused by the misconducts of the promoters, they shall be held accountable so as to protect the interests of the company, legal promoters and the creditors. Referring to the foreign legislative provisions and combining with some provisions in Chinese current civil laws, author puts forward that it shall allow the benefit-correlated party to start law suits against the defective incorporation that petition the People's Court for cancellation or invalidation of the company according to laws so as to deny the legal qualification on the circumstances that the defective incorporation shall not been rectified or severely damage national social public benefits. And furthermore,author analyzes the liquidated results when company is petitioned for cancellation or invalidation by the judicial verdict, or the legal qualification is extinguished, which shall better the current company legislation. At the same time, in order to avoid the continual occurrence of the defective incorporation and regulate the establishment of the company, author puts forward to the corresponding prevention measurements from the credit of shareholder, the responsibilities of the agencies for capital- assessed & verified and the company registration office, so as to prevent shareholders from lack of credit, guarantee the intermediary organization which verifies & assesses the capital correctly in accordance with the professional requirements, which shall ensure that the corporate establishment shall accord with the substantial and procedural provisions in law.