Company Promoters Legal Issues

Having some influences to a certain extent on the promoters, the companies incorporated, the third parties in connection with the incorporation of companies and the order of market economy, all actions taken by the promoters is essential to the legitimate incorporation of companies and the virtuous operation of the same. The process of incorporating companies always involves complicated legal problems and the disputes in connection therewith. However, some aspects of promoters are not touched by our legislation in respect of companies. Present system of promoters cannot satisfy practical needs in the incorporation of companies. More attention are paid to problems involved in system of shareholders, directors and managers than the system of promoters in academic circle, which weakens the theoretical study in this respect and makes the legislation lags behind the judicial practice.This dissertation mainly covers the following problems in respect of system of promoters in our jurisdiction: Firstly, the promoters of companies are not clearly defined in the company law, which arouses controversies in respect of qualifications of persons with limited capacity and promoters for partnership. Secondly, with regard to the assumption of liabilities by promoters who conclude contracts on behalf of companies before the incorporation of the same, legal loopholes exist. Thirdly, the supervisory system against the promoters in the process of incorporation of companies is not perfectly established.The above-mentioned problems are subject to comprehensive and deep analysis in this dissertation with the methods of comparative law and putting theory into practice. Besides the introduction and the conclusion, the dissertation is mainly composed of three parts.The first part covers the definition of promoters and qualifications of persons with limited capacity and promoters of partnership. In the first section,comparison is made in respect of definitions of promoters under common law system and civil law system and a proposition is also made that combination of "the theory of formal definition" and "personification of promoters" should be adopted to define the promoters in our jurisdiction. Whether persons with limited capacity and partnership are qualified as the promoters are analyzed in the second section and it is pointed out that promoters shall be competent persons in our jurisdiction and persons with limited capacity may be allowed to incorporate companies where certain requirements are satisfied. As far as partnership is concerned, it shall be qualified as the promoter.The second part involves the discussion of the contractual liabilities assumed by promoters before the incorporation of companies. At the very beginning, an introduction is made on the different legislative and judicial practice under common law system and civil law system in respect of assumption of contractual liabilities by promoters before the incorporation of companies. In consideration of the practical situation in our country and learning advanced legislative experience in other countries, it is proposed that in our company law contracts concluded before the incorporation of companies shall be deemed as contracts which are personally concluded by promoters and are binding the same only. Companies incorporated are given options to accept contracts concluded before the incorporation. Once the company chooses to accept the contracts, it shall be bound by the same and promoters' liabilities may be discharged.The third part mainly covers the supervisory system governing promoters. An introduction is firstly made on the framework adopted in the establishment of supervisory system governing promoters. Mirroring the relevant legislation in civil law system, it is pointed out that there is no necessary system of reviewing actions of promoters in founding meeting. Meanwhile, it is also pointed out that there is no notary supervision system in the incorporation of companies in our jurisdiction and suggestion is made that practice of compulsive notary in the process of incorporation in civil law system should be taken so that more emphasis may be imposed on the notary supervision in theprocess of incorporation. In order to give full play to the system of market supervision, the author further expands the consideration of supervisory system governing promoters and suggests that besides the supervision in founding meeting and notary supervision, the lawyers notary supervision and supervision of liabilities insurance for promoters which have positive effects on supervision of and guide to the incorporation deserve enough attention. It is also suggested that supervisory system governing promoters should include lawyers' notary and liability insurance supervision so that effective supervision may be exercised on the actions taken in the process of incorporation.To sum up, in respect of lack of system of promoters in our jurisdiction and with reference to relevant provisions governing the same in other jurisdictions, some proposals on perfection of relevant legislation are put forward in this dissertation, cherishing the hope of contributing to the system of promoters in our jurisdiction and providing guidance for our company legislation and judicial practice so that a balance may be struck between safety of transaction and efficiency.