Company Guaranty Law Studies

When a company provides a guarantee in the Chinese capital market, this often has the effect of promoting the flow of capital and expanding financing channels. Because of this, company sponsorship is a common practice and is a crucial part of company laws and regulations. Article16, Article122, Article149, and other provisions in the2005Revised "Company Law," report that companies have the legal right to provide guarantee on the basis of learning from foreign laws and regulations on these kinds of guarantees. The provisions about the issue of companies’ sponsorship deals in the new2005law are progressive and more reasonable than the "Company Law " in1993. In this paper, the author will make a comparative analysis about the provisions of company guarantee between the1993version and the2005version of the Company Law, and also make an introduction of foreign national and regional laws and regulations on these company guarantees in order to make some suggestions about Chinese companies’ guarantee through comparative analysis, case studies, and other research methods. The author suggests putting an end to directors, supervisors, managers and other senior managers who abuse their power to provide sponsorship to major shareholders and actual controllers of the company assets in order to ensure the interest of minority shareholders and creditors.This paper is divided into four parts. The first part introduces the legislation of the company laws and objections of the scholars before2005. The author then analyzes the acceptance of companies’ sponsorship at that time, and concludes with the court’s judicial attitude through case studies. The second part focuses on the legal and procedural analysis of Article16of the2005Company Law, which clarifies the right of a company to provide guarantee and the formal acceptance for the company’s guarantee under different circumstances. The third part is the introduction of different legislations for company sponsorship through two versions of the law system. Most countries certify that companies can provide guarantee, but also feel that certain standards are needed. In the fourth part, through the analysis of company law, the author proposes that China should learn from the experience of foreign legislation and strict procedures for external guarantee in eider to improve Chinese companies’ guarantee system.