A Study On The Legal Effect Of Corporate Charter

Corporation autonomy must rely on the corporate charter, only under thecommand of the corporate charter that the corporate governance structure could besustained and stable. Corporate charter is an important tool for internal corporategovernance. It is not only a foundation which establishes the legal relationshipbetween the company and its shareholders, directors, supervisors and other seniorexecutives but also a basis for dispute resolution. At the same time, corporate charteris an essential which the authority relies on to regulate the corporation. A companymust have a good corporate charter just like a country must have a good constitution.Good corporate charter can protect the shareholders’ interests, improve the efficiencyof the company’s operation and prevent disputes. On the contrary, bad corporatecharter will set hidden danger for the development of the company. Therefore, theresearch on the legal system of corporate charter is a very important issue in thecorporate law research field. The thesis takes the legal effect of the corporate charteras the research object. It begins from the basic theory and then analyses therelationship between the corporate charter and the rules of corporate law, the legaleffect of corporate charter and the legal liabilities of violating corporate charter, aimsto make reasonable suggestions to improve our legal system of corporate charter.This thesis is divided into the following four chapters:Chapter l: Fundamental Theories of the Corporate Charter. This chapter isdivided into four parts. The first part analyses the concept and content of thecorporate charter and point out that Common Law and Rome Law countries’corporate charter are essentially the same, though the form are different. The secondpart analyses the “Contract Doctrine”, the “Autonomy Law Doctrine” and the“Constitution Doctrine” and point out that these doctrines are express the nature ofcorporate charter from different aspects. The third part analyses of the characteristicsof the corporate charter and pointed out that the corporate charter has thecharacteristics of legality, stability, quasi-legality and openness. The fourth partdiscusses the role of the corporate charter. Within the company, the corporate charter plays a role to build the corporate governance structure. Outside the company, thecorporate charter is an important tool of the authority to regulate the company and toprotect the security of transactions. Corporate charter also can play the role ofpromoting the company management system innovation to compensate the lack ofcorporate law.Chapter2: The Relationship between Corporate Charter and Corporate Law.There are three kinds of rules in the corporate law: the mandatory rules, suppletoryrules and enabling rules. The corporate charter can not violate the mandatory rules,but can make it clear and concrete. The corporate charter can exclude suppletoryrules, but if the parties do not make specific arrangements the corporate law will beapplied. The corporate charter can make specific arrangements according to theenabling rules and these specific arrangements will have force of law.Chapter3: The Legal Effect of Corporate Charter. This chapter respectivelydiscusses the time limit and binding force of corporate charter. About the time limit,the effective date should be different according to the content of the corporatecharter and the revocation date should be the date of termination of the company.About the binding force, the thesis respectively discusses the binding force of thecompany, the shareholders, the directors, the supervisors, the managers and theperson outside the company. The corporate charter is the code of conduct of theinternal persons of the company but it can not band the third party acting in goodfaith. About whether the third party is acting in good faith, the company should havethe duty of proof. Finally, according to traditional civil law theory, formulatingcorporate charter is a multilateral legal act so it could be invalid. The invalidity ofcorporate charter is divided in two types: the absolute invalid and relatively invalid.At present, China’s relevant laws of the legal consequence of the invalidity of thecorporate charter are not perfect enough.Chapter4: The Legal Liabilities of Violating Corporate Charter. In the judicialpractice of China, the role of the corporate charter is not been fully exploited. Thecharter-makers often follow the template and do a fill-in-the-blank job when they areformulating corporate charters, rarely make personalized arrangements suitable fortheir company’s features so that the rules of the corporate charter are always be similar, rough and lack of maneuverability. The causes of this phenomenon aremanifold. One of the important causes is that the legal system of pursuing legalliabilities of violating Corporate Charter is not perfect enough. It is very important toestablish the authority of the corporate charter. The thesis analyses the system ofshareholder derivative action and makes reasonable suggestions.