Defective Establish A System

Companies' defective establishment refers to a legal fact that the stability of a company's legal personality is affected, due to the illegal or improper deeds in the course of a company's being set up, despite of its successful establishment. Its major reflection is, a company has apparently been registered, obtained legal business license, and has been announced to the public legitimate and valid; the company, however, essentially fails to possess what is necessary for a legal company. Companies' defective establishment may impose influence on, or even deprive its legal personality. It will probably bring about a series of negative consequences to social and economic life. For instance, any discrepancy in capital amount may infringe upon the legal rights of creditors and demolish the transaction security; a company may be invalidated and its establishment goal remains empty. Nevertheless, due to its insufficient experience in legislation and inadequate concern for this issue, Company Law of the People's Republic Of China has set no sound standardization of it. Therefore, it is of great theoretical and practical significance to carry out, from the viewpoints of jurisprudence and legal regulations, research in depth into the legal problems arising from companies' defective establishment.This paper consists of four chapters:In Chapter I, an accurate and precise definition of companies' defective establishment is given. First of all, starting from the legal establishment of a company, the paper illuminates the evolvement and development of a company's establishment principles, and gives an introduction of the regulations concerning the essentially and procedurally important documents, which makes clear the essential and procedural qualifications necessary for a legally established company; then it carries out a discussion on the legal status of a company being established,in which a conclusion is made that such company is not a legal incorporation but enjoys limited civil rights. The discussion makes pavement for the research hereafter into the rights that a defective company enjoys and the responsibilities it takes on. In the following, a typical case is adopted to introduce the issue, i.e. the defective establishment of a company. In light of the qualifications necessary for a legally established company, the defective establishment of a company is defined, its various forms such as shareholder defect, capital defect and articles of association defect included.Chapter II focuses on the juristic aftermath resulting from companies' defective establishment, i.e. the question of whether a defective company is entitled to legal personality or not. In the chapter, the paper gives an introduction of the criteria set in the related laws of China concerning the legal consequences caused by a defective company; then it makes investigation into and comparison between the principles of acknowledgment and denial, which are the principles for defective companies respectively set in Anglo-American legal system and Continent legal system, and explores the relevant laws of some countries; finally it analyzes the value tendency and operational cost of the relevant laws in the two legal systems for China's reference.In Chapter III, the paper concentrates on the liability taken by a defective company . Regarding the liability, the paper begins with the introduction of the regulations set in relevant laws concerning the administrative and criminal responsibilities of companies' defective establishment, points it out that oversight exists in the relevant regulations with respect to the civil responsibilities of companies' defective establishment in the current laws, and explores how to perfect it. Followed are the illumination about the initiators' liability of substantiating capital and the liability arising from breaching capital contribution agreement in case that a company is entitled to legal personality, and the illumination about the liability of refunding the stock, the implicative liability for a company's establishment outlay and debt and the liability of breach of faith imposed on initiators in case thata defective company fails to obtain legal personality. And then, concentrates on its handing modes. Regarding the handling modes of the denial of defective companies' legal personality, the paper, at first, dwells on the handling modes in China's current administrative provincism and its weakness; then it carries out an investigation into the litigation pattern of the denial of defective companies' legal personality in the Continent legal system; finally it puts forward some suggestion pertaining the perfection of the handling modes of the denial of defective companies' legal personality, including the perfection of both administrative handling modes and judicial handling modes.In Chapter IV, some suggestion is given to perfect companies' defective establishment system in China, including improvement in legal consciousness, the judgment criteria for company establishment, the legal reasons for invalidating defective companies, systems of remedy to companies' defects, corresponding punishment mechanism, administrative repeal systems of defective companies, and proceedings of invalidating and repealing defective companies.