Research On The Regulation Of Company Law On The Illegal And Related Guarantee Of Listed Corporation In China

Illegal related guarantee of listed companies refers to the listed companies make wrong decisions to provide related guarantee, which is in violation of the provisions for the company’s limited procedures.Usually, its specific performance include:illegal representative of the ultra vires provides guarantee for their related party without the decision-making by authority to vote; fail to fulfill its obligation to avoid voting in unfair guarantee by the related shareholders or directors; the orgnization of unauthorized decision-making decides to provide guarantees in the absence of the articles of association of the company which violates the principle of stock sovereignty arbitrarily. These illegal operations are not easy to be found due to the nature of the concealing and the legitimacy appearance,leading to the result which is that the company needs to assume joint liability or compensation liability. Coupled with the amount of guarantees for related party is from millions to billions, while listed companies operating funds is limited,paying such a large sum of cash in such a short time leads the financial risk of listed companies upgrades quickly, usually it causes fracture of funds and listed company is forced into bankruptcy liquidation.Thus, the problem of listed companies illegal related guarantee has become a great hidden danger for the steady operation of the listed companies. Because it is unpredictable and irresponsible, the great losses are difficult to be awarded. However,Company Law of the People’s Republic of China in the regulation of illegal related guarantee exists many disadvantages: the narrow definition of the related parties leads to that the voting elimination system’s object is not comprehensive and it exacerbates the controll of shareholder for listed companies; actual controller and the subject of the legal representative are the ultra vires; compensation liability is such principle and lacks of practice, once the interest of the company is damaged, it is not promptly and effectively exercise the right recourse. In addition, article16 of the Company Law only provides decision-making procedure of the guarantee, but the liabilities are not clearly defined. Shortcomings of the Company Law make the related guarantee prevention mechanism imperfect and the illegal cost low, also increase difficulty tocontrol the behavior of the related guarantee.This paper firstly introduce the basic concepts of related parties and define the scope of related parties of the listed companies, concluded that the external manifestation of the related parties is a relationship of control or influence, but behind the essence is the relationship of substantial interest, association of listed companies also apply this standard to recognize. Secondly, specific forms of illegal related guarantee are summarized by combining with the specific case and the Company Law that existing provisions of listed company, concluded that the manifestations include three kinds of forms: which is not decided, or not evasive,or stipulated. Then analyse loopholes and shortcomings of Company Law in regulation of listed companies’ illegal related guarantee. Finally, according to chinese Company Law, in the presence of the deletion from the following several aspects are suggested: suggest to propose for perfecting the definition of related parties and expand the exclusion of the voting right system of the organizaton limits, construct completely operating responsibility system and limit shareholders’ right to vote. By improving the Company Law, reduce the number of relevant provisions of illegal related guarantee of listed companies and prevent. Mostimportantly, the listed companies’ interests will be timely and effective-ly relieved.