On Perfecting Of The External Guarantee System Of The Listed Companies In China

With the development of market economy in China as well as the reform ofcompany law, the behavior of external guarantees for listed companies transform fromthe former prohibition, strict control to allow gradual.External guarantees of thecompany as a normal behavior of the financing guarantee which for the normal businessactivities need, and at the same time it is also advocated by the Guarantee Law societynormal economic phenomenon. The secured the system prompted debtors performanceof its obligations in a timely manner, reducing debt risk, strengthen claims credit toensure that claims to achieve, and it plays an important role in maintaining the order ofthe market economy. However, at the same time the guarantees will bring a certaindegree of risk, companies must take responsibility if the debtor is unable to repay thedebt, to provide security, the interests of shareholders and creditors of the company willbe damaged.In recent years, the external guarantees of listed companies in China have beensome problems, affect the order of the market economy seriously. More and more listedcompanies have external guarantees in China, and there always a huge amount of theguarantee. The associated guarantees phenomenon is serious, and there was a series ofguarantees circle, security chain. Illegal guarantees and malicious guarantees arefrequent occur too. Overdue security event frequency is increased significantly,resulting litigation. This series of questions, I believe that is due to the lack of domesticfinancing methods, can not meet the financing needs of the company. Within thedominance of the equity structure the in company is irrational. Relevant laws andregulations are imperfect, which is difficult to regulate illegal guarantee behavior.Banking financial institutions borrowing program and post-loan managementmechanism have loopholes.Comparing and analyzing the legislation of several countries of the common lawand civil law, I find that most of the other national legislation does not negate the listedcompany’s external security capabilities, but generally take the form or substance of thestandards for the company’s external guarantee limit. I think China should learn tomature foreign legislative norms, making the company executives loyal integrityobligations more strict, and then establish a complete and effective system ofinformation disclosure and strict the penalties of violations. In addition, I analyze thestatus of external guarantee of the listed companies in our legislation, that the new Companies Act and the Securities Regulatory Commission issued regulations havemade great progress on External Guarantee of listed companies than before, but it is stillinadequate. China’s legislation is not put forward for the guarantees and warrantiesassociated guarantees phenomenon chain solutions; information disclosure system is notperfect; defects in the rights of minority shareholders protection and relief; liabilityillegal guarantee behavior regulation is not clear enough.According to the current situation about the external guarantee of listed companiesin China, I give several suggestions about improve the external guarantee system of thelisted companies in China. In legal aspects, we should strict the procedural provisions ofexternal guarantees. Strengthening the obligations and responsibilities of the directors inthe corporate guarantees. Strengthening the corporate guarantee information disclosuresystem and increase the punishment for violations. In the aspect of internal system ofgovernance in listed companies, specialized independent directors should be responsiblefor external security matters establishing external guarantee risk assessment systemStrengthening monitoring of the security project and implementation of incompatibleduties mutual separation control.