Reflection on the Normative Intent of Article 16 of China’s Company Law

Abstract

The ultra vires guarantee by the legal representative of a company not only involves the general rules of the Contract Law, the Guarantee Law and the Civil Code of the People’s Republic of China, but also should consider its nature as a commercial act and take into account the legislative intent of the Company Law. In judicial practice, the regulation of the company’s ultra vires guarantee is scattered and blurred, still needing improvement. Before the advent of the judicial interpretation of the Guarantee Law, the system of legal interpretation and application process was confusing and lacked legal basis. Article 16 of the Company Law affirms the company’s ability to provide external guarantees. In the academic circle, the dispute on the effectiveness of the company’s ultra vires guarantee often revolves around the nature of Article 16 of the Company Law. But in essence, Article 16 is a rule to regulate corporate governance, and its legislative purpose is to regulate the process of intention formation of the company’s external guarantee. To examine the effectiveness of the legal representative’s ultra vires guarantee, one must take into account the interpretation of the intention expression process. The process from the company’s intention formation to the intention expression is not only a significant part to judge the validity of the ultra vires guarantee contract, but also the true representation of the normative intent of Article 16 of the Company Law.