Research On Validity Of Ultra Vires Guaranty Contract In Limited Liability Company

In the limited liability company, it is common that the director, manager or legalrepresentative grants the guaranty to others in the name of the company without theconsent of the board meeting of directors and shareholder meeting. The validity of theguaranty contract has become an important issue. Article16of Company Law (2005)provides that company shall obtain the consent of board meeting, shareholder meetingpursuant to the provisions of articles of association when providing guaranty to anythird party. However, the scholars and the judges hold very different views regardingthe interpretation of this clause and the effect on the validity of guaranty contract, as aresult, the contract has been determined as valid, invalid or validity to be determined.In the judicial practice, the difference of the understanding in the basis of judgmentresults in the different results of judgment of similar cases. This paper aims to find thevarious analytical methods to the judgment of the guaranty disputes by collectingvarious company guaranty cases in different regions in different years and to analyzethe requisites for the validity of the guaranty contract from the perspective of thetraditional civil law and summarize a logical analytical method so as to provide apractical solution to the judicial practice and improvement suggestions to thedevelopment of the company law, etc.There are following five chapters:Chapter I systematically summarizes the current legal theories in academic and judicial practice fields and foreign legislations and judicial practice of the relatedissues.Chapter II analyzes and categorizes the gathered cases of guaranty contractdisputes, and categorizes the judgment reasons in various cases.Chapter III analyzes the validity of the ultra vires guaranty contract from theperspective of the traditional civil law, including (i)whether the contract object iscomplied with mandatory laws and regulations, ie, whether the Article16of CompanyLaw(2005) has immediate impact on the validity of guaranty contract;(ii) whether thedeclaration of intention is true, ie, where the declaration of intention of legalrepresentative is different from that of company, how to determine the validity of thedeclaration of intention.Chapter IV analyzes the “bona fides third party” in the ultra vires guarantycontract in the content of agency by estoppel, including the scope and content of theexamination duty and the burden of proof assumed by the bona fides third party.Chapter V draws the conclusions and presents suggestions to legislations andjudicial practice.