Research On The Legal Problems Of China’s Corporate External Guarantee

Since the seventies and eighties of the last century, China’s business economy has been developing rapidly. Companies have made considerable progress through constant innovation with their types becoming more diversified and systems being constantly improved. Among the systems, there is an important one called the corporate external guarantee system. It plays an increasingly important role in the corporate economic activities and also becomes more and more important in almost every company in the world. The corporate external guarantee system promotes the flow of funds in the market, and strengthens exchanges between companies, as well as provides more opportunities for the trading of the main bodies, which is beneficial for the market economy. Thus, the corporate guarantee system is commonly recognized as a fundamental right of the company. Corporate external guarantee is different from the corporate daily business activities. Once the corporate guarantee right is abused, not only the interests of the company,but also the interests of its creditors and shareholders will be damaged. Therefore, in order to maintain the balance of interests of all parties, on the one hand, legal capacity will be endowed to enterprises by corporate laws; on the other hand, corporate guarantee behaviour will be restricted by corporate laws as well. The Company Law of People’s Republic of China also has set restrictions for corporate external guarantee behavior. Seeing from the historical reform of China’s Company Law, these restrictions are undoubtedly a great progress. However, it still has not been able to improve the confused situation of the corporate external guarantee.This thesis is divided into five chapters:Chapter One discusses the concept, the nature and the guarantee capacity of the corporate external guarantee. It points out that the corporate external guarantee behaviour belongs to the company’s non-routine business activities, and is an kind of commercial acts. The author recognizes that the company has the external guarantee right.Chapter Two discusses the status of the company’s external guarantee,from both the public companies and the administration of justice perspectives. The amount of guarantee funds is very huge and affiliated guarantee phenomenon is serious. Various national ministries and commissions including China Securities Regulation Commission have issued series of policies, but the chaotic situation has not been changed. In judicial practice, although the Supreme Court has issued guidance cases, judgments from local courts at all levels are not unified yet.Chapter Three discusses the legislative history and purpose of Article 16 in the Company Law, and dissects that provision from another perspective, rather than simply judge on its property to determine validity of the contract. Article 16 is the company’s internal decision-making behaviour, therefore, the articles of association do not have effect to the external world.Chapter Four discusses that to maintain the security of the transaction, different companies shall be given different types of review obligations. The contract can be considered valid only when the "goodwill" person signs guarantee contracts with the internal decision-making process companies.Chapter Five discusses every provisions of the Article 16 in the Company Law-general guarantee and related guarantee, and finally, the author proposes her own way to resolve this problem that the Supreme Court shall announce guidance cases, and enact judicial interpretation, and then, conduct legislation.