On Legal Person 's Law

Economic globalization emphasizes that legal person assumes an increasinglyimportant role in international civil and business activities. At the same time thecomplexity of legal person for international cases requires a certain theoretical basison which personal law of legal person is established. The personal law of stipulatesthe rights and duties of legal person, regulates its commercial behaviors and therefore,even acts as a prerequisite for settling legal disputes.Based on the definition of personal law, personal law of legal person can beconsidered as a formula of attribution for resolving problems caused by different legaltreatments of commercial activities in different countries. These activities include theestablishment, capability, internal affairs and closure of legal persons. Currently thetwo major fundamentals are the ‘real seat’ doctrine and the state-of-incorporationdoctrine. The ‘real seat’ doctrine takes the real state of legal persons as the connectingpoint for personal law of legal person. The real state refers to where a legal personmakes a major presence. This doctrine is accepted generally by German, France andother countries applying civil law system. Countries like Great Britain, the UnitedStates and Switzerland which adopt common law system follow thestate-of-incorporation doctrine. According to this doctrine, the connecting pointshould be where a legal person is set up.The ‘real state’ doctrine and the incorporation theory reflect two values, equalityand freedom respectively. The former doctrine is closely related to the inherentconnection between personal law of legal person and the commercial activities oflegal persons, which poses a risk for legal persons of establishment failure. Incomparison, the incorporation theory is based on the state selected without restrictionby who initiates the establishment of a legal person. This theory is likely to enable thelegal persons to avoid the law of the state and makes it possible for the appearance of‘false international companies’. Therefore, these two theories are applied in combination by countries no matter civil law system or common law system theyadopt.Foreign legal person recognition is an examination process of foreign legal personsby the local country in accordance with its own law in order to grant the legal personsrecognition and permission to carry out civil activities involving foreign interestswithin the country. Foreign legal person recognition occurs only after a legal personhas been confirmed as a foreign legal person by personal law of legal person.However, there is a view in China that confuses personal law of legal person withforeign legal person recognition. The paper will draw a distinction between the twoconcepts.In China, regulations of personal law of legal person can only be found in somerelated laws as well as nongovernmental rules and draft until the enactment of TheLaw of the Application of Law for Foreign-related Civil Relations. The law setssystematic rules for the first time for personal law of legal person, adopting acombined standard with the main consideration given to the location of companyregistration and the location of its business operation as a supplement. Though thislaw represents without doubt a progress, the author finds the space for improvement.The author argues that a combination of the location of company registration and thelocation of business operation is not suitable enough to act as the connecting pointsbecause not every country takes company registration as a compulsory condition forthe establishment of legal persons and the uncertainty and variability make theoperation location seldom considered by countries. Thus, the author suggests that thestate of the incorporation should be taken into consideration combined with thelocation of the management office. As to the scope of application of personal law oflegal person, China only numerates three aspects, including legal persons’ capability,the institutional framework and the rights and duties of the boards. This is far fromenough compared with how the scope is defined in detail by other countries like Switzerland, the United States and Great Britain. The author suggests that the scopeof application be expanded to the greatest possible extent in terms of eithernumerating clearly what factors should be included or, drawing on the Swedish model,specifying what factors should be excluded.