Problems On The Contract For The Management Of Limited Liability Company

In recent years, contracted management contract dispute of limited liabilitycompany often appears in practice. The dispute between Pan Jinyao and ShanghaiYongda Biological Engineering Co., LTD is a typical one. On the basis of this casethis thesis explores the four aspects of the limited liability company contractedmanagement contract: the validity of contract, the contract alteration, the attribution ofthe account balance in the contracted period and profit distribution., and then thepaper puts forward several suggestions in order to avoid the dispute. In addition to theintroduction and conclusion, this thesis is mainly divided into the following five parts:The first part mainly analyzes the validity of limited liability company contractedmanagement. The two parties of the contract are the company and the contractor.Main body of the case is qualified, and the content does not violate the laws,administrative rules or any prohibited provisions of regulations. So the validity of thecontract shall be acknowledged in terms of the contract between Pan Jinyao and thecompany.The second part discusses the effectiveness of the contract alteration. In additionto meeting the general requirements of the Contract Law the content of the alterationin the agreement should be clear. Whereas the receipt in the case does not make itselfclear in the content of the contract, so the alteration is invalid.The third part discusses the balance ownership of the Account No.219at the endof the contract. According to the Company Law the company should have enjoyed theownership of the property, for the Account NO.219is the company account. In thisaspect, the account balance should belong to the company. But the dispute betweenthe company and the contractor is an internal one. So the dispute should be dealt withon the basis of the contracted management contract. The contract has prescribed thatonly the contractor can use the Account No.219during the contracted period. Yet inreality the company shares the account with the contractor. So the company is inbreach of the contract by violating the agreement. Thus according to the contract the balance in the Account No.219all belongs to the contractor.The fourth part analyzes the dispute of profit distribution. According to theArticle167of the Company Law the company should first make up the losses,withdraw the statutory reserve fund and then it can distribute the profit according toprovisions of the articles, for the company contracted management contract can notbreak the mandatory provisions. According to the contract the profit enjoyed by thecontractor should be covered in the company operating costs, the essence of thecompany’s profit is the profit which has been agreed in the contract. Therefore, theprofit distribution of the contracted management contract does not violate themandatory provisions of the Company Law. After the performance of paying thecontractor profit which is prescribed by the contract the company should, without anyspecial agreement, make up the losses, withdraw the statutory reserve fund and thendistribute profit to the shareholders in accordance with the provisions and regulationsof the Company Law.The fifth part puts forward several suggestions about the formation of contract.Inspection of the contractor and his company’s relative qualification and its propertyliquidation should be strict before signing the contract. The terms of protecting thecompany’s creditors and the guarantee of the contractor should be agreed in thecontract. The obligation of the fixed report during the contracted period and thebusiness of the contractor should be cleared in the contract. The terms of the profitdistribution, dividable profit and the agreed floatability of the profit also should beclarified in the contract.