Legal Research On The Validity Of Company's Security Contract

The judgments about company's security case tend to be unified: The Article 16 of Company Law is regarded as a administrative mandatory provision,which is aimed at restraining internal procedure of making decisions for a company.The internal procedure does not have any effect on the validity of company security contract.Meanwhile,for the sake of savings in transaction costs,the security holder does not assume the obligation to review the company's resolution based on the principle of commercial appearance.The separate in “company's internal resolution” and “external act” results in the fact that the company as a guarantor is always at a disadvantage and take the full risks.Therefore,this kind of judgment is not the best way to balance the interests of both parties to the contract.In accordance with the theory of law and economics,it is the most efficient arrangement that the security holder need to bear the review obligation.Relevant guarantee may be a way of returning capital to shareholders.From the point of capital maintenance,in order to prevent the occurrence of the risk,the provisions of Article 16 on the relevant guarantee shall refer to mandatory provisions on validity.At the same time,as the main party of the security contract,the company should bear the obligation to consult the company's financial report and determine whether the amount of security erodes to to the company's capital for further safeguarding the safety of the transaction.The article is divided into seven parts.The first part is the introduction mainly on the background of the topic,research significance,and sort out the existing documents.The second part analyzes and sums up the judgments of courts based on the company's security cases in recent 3 years.The third part classifies the validity of resolution according to the existing theory and discusses the possibility of the effectiveness of the security resolution under different circumstances.The forth part is intended to clarify the relationship between the resolution as a company's internal procedure and the security contract.The fifth part explains the mechanism of the capital maintenance principle and analyzes the connection and the boundary between the relevant security and the return of capital.The sixth part reveals the logic behind the judgment from the point of law and economics,and resets the review obligation by combining with principle of capital maintenance.The seventh part is the conclusion.