On The Judgement Method Of The Validity Of Corporate External Securities Contract

Business world prospers because merchants always aim at accumulation of wealth.Modern business develops rapidly.Financing becomes a must-have for an enterprise's further development and securities are required more frequently.Gaining more pecuniary resource through leveraged loans has become the choice of the entrepreneurs who have the ambition to create successful business and securities should be offered for this aim.Lenders seek safe transactions.Had securities not been offered,lenders would hesitate to provide loans,which could reduce transaction efficiency.Considering this,lenders'interests are given more weight in corporate external security transactions.In practice,courts follow this idea as well.However,a corporate is an organization in nature.To sign a contract with a lender,a corporate should rely on a natural person who may not be loyal to it.This brings huge risks——a representative may ignore a company's interests and seek his own interests,making the company face the possibility of loss of capital.This is contrary to capital maintenance.On account of the considerations above,this essay reviews relevant judgments and analyzes the arguments behind.To make an argument,this essay focuses on the method of restriction on the right of representation.In Chapter one,descriptions of current legislation and relevant academic theoriesare offered.In the second chapter,this essay summarizes the main methods applied by the SPC to analyze the validity of the subject-related contract and makes a table to reflect current condition of practical cases.Chapter three provides review of the methods which take Section 16 of Corporate Law as their core and the drawbacks of these methods are cleared.The next chapter demonstrates the method of restriction on the right of representation based on Section 50 of Contract Law should be applied under special circumstances.The proof of this includes lackof consideration of security,balance of interests and analysis of aim of Section 16.In the end,advice will be given on how to apply the aforesaid methods.Starting from the identification of corporate external securities,in this chapter this essay explains how to review relevant documents such as the bylaw according to Section 16 and analyze categorical practical problems.