The Legal Effect Of The Guarantee Of The Company For Others

Article 16 of The Company Law provides for the internal decision-making procedure for the guarantee of the company for others,but doesn't provide for the validity of the guarantee contract contradicting this provision.The most typical act in violation of this provision is that the legal representative's ultra vires action in making a guarantee contract.This dissertation takes this dispute as the research object to analyze the legal effect of the guarantee of the company for others in this kind of situation.And the core issue is the validity of the guarantee contract.To determine the validity of the guarantee contract made by legal representative which is ultra vires(“guarantee contract”),it's necessary to seek an appropriate normative basis.In theory and practice,there are mainly two ways to determine the validity of the guarantee contract: one is based on the normative nature of Article 16 of The Company Law,and another one is established in the Article 50 of the Contract Law.This paper analyzes the legislative purpose and the adjustment object of Article 16 of The Company Law and the constitutive requirements of apparent representation individually in order to resolve the core issue.And by analyzing,the appropriate normative basis is the Article 50 of the Contract Law.This paper is divided into three chapters:The first chapter elaborates the normative basis of the validity of the guaranteecontract.Through the summary and analysis of the judicial reasons in practice,there are two ways to determine the validity of the guarantee contract.Article 16 of the Company Law regulates the internal procedures for the guarantee of the company for others in order to protect the interests of the shareholders,creditors of the company,and it adjusts the internal legal relationship of the company.Thus,this stipulation is the basis to determine the validity of the resolution of the board of directors,board of shareholders or shareholder meeting,rather than the validity of the guarantee contract.Article 16 of the Company Law is a statutory restriction on the power of legal representative.The violation of this article by legal representative is beyond the scope of the delegate authority.Thus,the judgment of the validity of the guarantee contract should be based on the stipulation on the validity of the legal representative's ultra vires action,that is to say,Article 50 of the Contract Law should be used as the normative basis.The second chapter analyzes the legal effect of the guarantee of the company for others when constituting the apparent representation.According to Article 50 of the Contract Law,if the ultra vires action constitutes the apparent representation,the guarantee contract is valid and the company shall assume the guarantee responsibility.The constituent requirements of the apparent representation include two aspects: first,the appearance of representation that the legal representative implements the ultra vires action in the name of the company;second,the counterparty is in good faith,that is,it has reason to believe that the legal representative does not exceed the limits of delegated authority.Generally speaking,due to the particularity of the legal representative's identity,it often has the appearance of representation in the implementation of the guarantee action,and the counterparty trust it more easily.The “good faith” of the counterparty is an important component of the apparent representation.This chapter focuses on the analysis of the criterion of “good faith” in the second section.The time of good faith should be based on the time of the establishment of the contract,and based on the time of the arrival of intention could lead to the imbalance of benefit between the company and the counterparty.The law has public power,so Article 16 of theCompany Law provides a concrete basis for the judgment of “good faith” of the counterparty in the contract.Only the counterparty fulfills the formal examination obligation to the resolution of the board of directors,board of shareholders or shareholder meeting can it assert that it is in good faith.Counterparty of the contract needs to review the resolution of the board of shareholders or shareholder meeting in correlated guarantee,and review the regulation of the articles of association to determine the decision-making body in common guarantee.If there is no regulation about the decision-making body for common guarantee in the articles of association,the counterparty just needs to review the resolution of the board of directors that it can assert in good faith.The review of resolution of the board of directors,board of shareholders or shareholder meeting is limited to the examination of written resolutions and other related documents,including whether the documents are original,whether the decision-making body or the guarantee amount is in coincidence with the regulation of the articles of the association or the law,whether the names of the shareholders or directors listed in the resolution are conformity with the list in the articles of association and the business registration.For the burden of proof of the “good faith”,the counterparty only needs to prove that the legal representative has the appearance of the representation and the fact that the counterparty made the contract with the legal representative based on the appearance,that is,presumed the counterparty is in good faith.If the company can't prove the counterparty is in bad faith,then the apparent representation is constituted,the guarantee contract is valid and the company need to take the guarantee responsibility.The third chapter expounds the effect of the guarantee of the company for others when it doesn't constitute the apparent representation.If the counterparty is in bad faith(excluding the circumstance of malicious collusion),the behavior of the legal representative doesn't constitute the apparent representation,which shall be analogized to the relevant provisions of unauthorized agency.That is to say,the validity of the guarantee contract is to be determined.If the company ratify the contract,it's valid and the company assume the guarantee responsibility.But if thecompany doesn't ratify the contract,the contract doesn't have effect on the company and the legal representative shall assume the guarantee responsibility.According to Article 171,Paragraph 3,and Paragraph 4 of the General Principles of the Civil Law,the liability assumed by the legal representative is the liability for contractual debts or damages.If the counterparty is in bad faith,both parties have fault and are liable at their own fault.The provision of unauthorized agency liability stipulated in the General Principles of the Civil Law is to protect the positive interests of the counterparty.This stipulation doesn't accord with the principle of autonomy of will and the principle of trust protection,especially in the case of counterparty in bad faith.In the case of ultra vires guarantees,the liability assumed by the legal representative shall be the compensation for the counterparty's negative benefits.