Our Company Has Set Up The System Of Legal Research Defects

In recent years, with the rapid development of China’s market economy, companies have gradually become the most important market players and the carriers of the legal relationships in the market order. The prerequisite of the companies to play an important role in social economy is their effective existence. If the companies want to become qualified market players, the only way they need to do is to comply with the conditions and procedures prescribed by law. With the establishment and improvement of the market economic system in China, a large number of companies can be established. However, in the process of the establishment of the companies, there are various forms of defective incorporation, which are not very conducive to the stability of social and economic order and transaction security. At present, such matter is only prescribed in Article199of The Company Law of People’s Republic of China. But as this provision is quite vague and not in line with the market economy, so it is necessary to carry out some further studies of relative legal issues relating to the regulation of the defective incorporation of companies.This paper studies the theoretical foundation of the defective incorporation, explicit the concept of the company set up and the change of establishment principle, on this basis leads to the establishment of the connotation and denotation of Defective clear flaw to set up the company’s external manifestation. Then through the legal analysis, we can draw a conclusion, defective incorporation need to balance the safety and efficiency of the basic value pursuit, moreover, it need to weigh the conflict between companies maintain and minority interests protection.Subsequently, based on inspection of extraterritorial defective incorporation, the author discusses the legislations of defective incorporation of the two main legal systems. There are two models of dealing with defective incorporation in common law:principle admission and specific admission. In civil law, there are three models: null model, withdrawal model and distinguishable denying model. Although there is difference between the consent in common Law System and the denial in civil Law System, the increasing merging of the two law systems tells us that we can only deny the qualification of its legal person when it is definitely stipulated in the law.Unfortunately, our new Corporation Law does not pay sufficient attentions to this issue. Instead, the law only has some rough and fragmentary stipulations, and is defective with the following problems:ambiguity about existence of the legal personality of defective incorporation, too narrow a scope of defect, lack of liabilities of related parties, and etc.To promote protection of business efficiency and interests of corporations, shareholders and creditors, we taking advantages of the two major law systems should clearly admit validity of defective incorporation and furthermore perfect the institutional arrangements including remedy of defective incorporation, compulsory dissolution of corporations concerned and incurred civil liabilities. At last, this paper gives out comments and suggestions about the new Corporation Law based on close observations.