Study The Security-provision System Of Corporations To Other Enterprises In China

The security system is designed to protect creditors'rights, limit the transaction risks, ensure the safety of transaction and satisfy corporation's financial and investment needs, so as to facilitate the economic growth. Provisions of security to other enterprises are of great importance for corporations to operate normally and function as basic economic units. Therefore, study the security-provision by corporations to other enterprises can help us to carry on rational analysis on this system. It can help us to obtain the practical approach for improving the system. In the meantime, it can reduce the risk of the security provision and strengthen the supervision on the security provision. Our Corporate Law is deemed to be a relatively mature regulation, since it explicitly provides the corporation's security-provision capacity, decision-making body and mechanism as well as the restricted security-providing parties. However, the decision-making standard is regarded as procedural and lacks practical and hard standard. The Corporate Law vests the corporate charter with great authority but fails to stipulate the legal effect of charter-violation. After analyzing the security system of the corporation, the effect of violation the corporate charter was discussed by category. At the same time, this article put forward some advices on improving the security-provision by corporations to other enterprises, in order to reducing the illegal security-provisions. The intent of this article is to offer some suggestions on the development of a relatively reasonable and efficient security-provision mechanism of corporations. In addition, self-defensive strategies against risks of security-provision would also be discussed to maximize the interest of corporations.This article can be divided into three parts.The first part of the article is an overview of the security-provision by corporations to other enterprises. First of all, from the points of creditors, shareholders and the market, the risks of security provision are analyzed. After that, from the points of the need of the corporation's financing, the need of competition of the market and the group development of the corporations, it concluded that the security-provision by corporations to other enterprises is necessary. Lastly, three mode of security-provision by corporations to other enterprises in other countries are introduced. The second part of the article analyzes the security system in the Corporate Law. The provisions in 1993 Corporate Law and 2005 Corporate Law on security providing are introduced. Then, there is an analysis on the obligation of creditors about the corporate charter and the form of security decisions. Lastly, the effects of the security decisions which violating the corporate charter are discussed by category.The third part of the article is about perfecting the system of security-provision by corporations to other enterprises. On the one side, it puts forward some suggestions on legislation. On the other side, it perfects the security system for the corporations from the point of the companies. First of all, there are some suggestions on the procedural provisions, the obligations and the responsibilities of the directors and the disclosure of corporate security information. Then there are some suggestions on strengthen the management of the security contract and perfect the structure of the corporate governance ect.