Article 7 If the legal representative of the company violates the provisions of the Company Law on the procedures for the resolution of the company's external guarantee and exceeds his authority to conclude a guarantee contract with the counterparty on behalf of the company, the people's court shall deal with it in accordance with the provisions of Articles 61 and 504 of the Civil Code:
(1) If the counterparty is bona fide, the guarantee contract shall take effect against the company; Where the counterparty requests that the company bear the guarantee liability, the people's court shall support it.
(2) If the counterparty is not bona fide, the guarantee contract shall not be effective against the company; Where the counterparty requests that the company bear liability for compensation, the relevant provisions of Article 17 of this Interpretation shall be applied by reference.
Where the legal representative exceeds his authority to provide guarantees and causes losses to the company, and the company requests that the legal representative bear the liability for compensation, the people's court shall support it.
The term "good faith" as used in the first paragraph refers to the fact that the counterparty did not know and should not have known that the legal representative exceeded his authority at the time of entering into the guarantee contract. Where the counterparty has evidence to prove that a reasonable review of the company's resolution has been conducted, the people's court shall find that it constitutes good faith, except where the company has evidence to prove that the counterparty knew or should have known that the resolution was forged or altered.
【Purpose of the Article】
This article is about the validity of the legal representative of the company exceeding his authority to provide security to others.
【Overview of Provisions】
As for the validity of the legal representative exceeding his authority to provide security, it should be determined according to whether the counterparty is bona fide: if the counterparty is bona fide, it constitutes an apparent representative, and the effect is equivalent to that of an effective guarantee; If the counterparty is not bona fide, the guarantee act shall not be effective against the company, and the company shall not bear the guarantee liability arising from the effective guarantee, but shall bear the liability for contractual negligence. The so-called good faith means that the counterparty did not know and should not have known that the legal representative exceeded his authority at the time of entering into the guarantee contract. Where the counterparty has evidence to prove that a reasonable review of the company's resolution has been conducted, the people's court shall find that it constitutes good faith, except where the company has evidence to prove that the counterparty knew or should have known that the resolution was forged or altered. After the company assumes responsibility, it has the right to recover from the legal representative.
【Controversial Views】
With regard to the legal consequences of the company's legal representative exceeding his authority to provide security, when determining whether the counterparty is bona fide, should the formal review or reasonable review be adopted? Although the Interpretation of the Guarantee System of the Civil Code basically follows the relevant provisions of the Minutes of the Civil and Commercial Trial Conference on the external guarantee system of companies, it does not simply follow the standard of determining good faith, but further strengthens the counterparty's review obligation and stipulates that it must fulfill the reasonable review obligation.
There has always been controversy as to whether the company should be liable when the counterparty is not in good faith. One view is that Article 171, Paragraph 4 of the Civil Code should be applied by reference to the provisions of paragraph 4 of Article 171 of the Civil Code, which stipulates that "if the counterparty knows or should know that the actor has no authority to act as an agent, the counterparty and the actor shall bear responsibility according to their respective faults", and the company is not a party to the contract, so it does not bear any liability, but the legal representative as the actor should bear the responsibility. Another view is that the ultra vires representative act of the legal representative is still the act of the company, and if the guarantee contract is invalid, the company should still bear the liability for damages if it is at fault, which is in the nature of contractual negligence.
[Understanding and Application]
1. Overview
About the scope of "Company". Article 2 of the Company Law stipulates that: "The term "company" in this Law refers to a limited liability company and a company limited by shares established in China in accordance with this Law. Article 217 of the Company Law stipulates that: "This Law shall apply to foreign-invested limited liability companies and joint-stock companies; Where laws on foreign investment provide otherwise, apply those provisions. Article 31 of the Foreign Investment Law stipulates that "the Company Law of the People's Republic of China, the Partnership Enterprise Law of the People's Republic of China and other laws shall apply to the organizational form, organizational structure and activities of foreign-invested enterprises." It can be seen that, in terms of their organizational form, foreign-invested enterprises also include companies, partnership enterprises and sole proprietorship enterprises, among which foreign-invested enterprises under the corporate system are still subject to the provisions of the Company Law. As for a partnership and a sole proprietorship, since it is not a company, the provisions on external guarantees of the company cannot be applied.
Regarding the object of interpretation of this article. With regard to the validity of ultra vires guarantees, it is necessary to determine whether it constitutes ultra vires in accordance with the relevant provisions of the Company Law, and also to determine the validity and legal consequences of the contract in accordance with the relevant provisions of the Civil Code. The first is Article 16 of the Company Law. According to Article 16 of the Company Law, whether it is a related guarantee or a non-related guarantee, it needs to be decided through the company resolution procedure. Therefore, if the legal representative provides a guarantee to the outside world without the company's resolution procedure, it constitutes an ultra vires representative. In addition, the related guarantee provided to the shareholders or actual controller of the company must be resolved by the shareholders' meeting or the general meeting of shareholders; If a guarantee is provided for others, it depends on how the articles of association stipulate. The second is Article 504 of the Civil Code. Accordingly, for ultra vires security acts, it is necessary to distinguish whether the counterparty is bona fide at the time of the conclusion of the contract to determine the validity of ultra vires representative acts. If the counterparty is bona fide at the time of the conclusion of the contract, it constitutes an apparent representative, and the company bears the guarantee liability. The third is Article 62 of the Civil Code. When the legal representative exceeds his authority to provide a guarantee and the counterparty is in bad faith, although the company does not bear the guarantee liability, it does not mean that the company does not bear any liability, but bears the liability for damages for its fault, which is in the nature of contractual negligence.
The basic adjudication ideas for the company's external guarantee cases. To accurately understand this article, it is necessary to clarify the basic adjudication ideas of the company's external guarantee cases. To this end, we summarize it into the following steps: First, first look at whether there is a resolution. If there is no resolution, it indicates that the legal representative has provided external guarantee without the company's resolution procedure, and in principle, it constitutes a ultra vires representative. However, taking into account the current situation of corporate governance in mainland China, Article 8 of the Interpretation of the Guarantee System of the Civil Code provides for three exceptions. If this exception falls under this circumstance, the company shall be liable for the guarantee even if it has not been resolved by the company. Second, if there is a resolution, it is necessary to determine whether it constitutes a representative who exceeds his authority by looking at whether it is a qualified resolution. If a company provides a guarantee to its shareholders or actual controllers, it must be resolved by the shareholders' meeting or the general meeting of shareholders; The provision of non-affiliated guarantees to other persons depends on the provisions of the articles of association. If the resolution provided by the legal representative complies with the provisions of the law or the articles of association, the guarantee shall take effect on the company; Otherwise, it constitutes ultra vires security. Third, for ultra vires guarantees, it is necessary to determine the validity of the guarantee act by looking at whether the counterparty is in good faith. If the counterparty is bona fide, it constitutes an apparent representative, and the guarantee act is effective against the company; If the counterparty is not bona fide, the guarantee shall not be effective against the company. Fourth, the company's liability should be determined according to the effectiveness of the guarantee act: if it constitutes an apparent representative and is effective against the company, the company shall bear the guarantee liability; On the contrary, although the guarantee act is not effective against the company, the company does not bear the guarantee liability arising from the effective guarantee, but still bears the liability for contractual negligence.
II. Determination of Good Faith
The so-called good faith here refers to the fact that the counterparty is unaware of the fact that the legal representative has exceeded the authority of the representative. Conversely, if they are aware of the facts, they would have bad faith. It should be made clear that if the legal representative does not exceed the authority of the representative, his representative act is naturally valid, and there is no need to distinguish between good faith and bad faith. On the other hand, if the legal representative provides a guarantee to the outside world without the company's resolution procedure, unless there are exceptions as provided in Article 8 of the Interpretation of the Guarantee System of the Civil Code, the counterparty's failure to review the company's resolution constitutes bad faith, and it is impossible to distinguish between good faith and non-interest. It can be seen that the distinction between good faith and bad faith is only meaningful when the legal representative exceeds his authority and may constitute an apparent representative, and in practice there are mainly two situations: one is that there is a resolution but it is not a qualified resolution; Second, there is a formal resolution, but the resolution is forged or altered.
The so-called form of qualified resolution refers to the circumstances under which a resolution is required by the shareholders' meeting or the general meeting of shareholders, and under what circumstances only a resolution by the board of directors is required, and this needs to be specifically determined by distinguishing between related and non-related guarantees. The so-called related guarantee refers to the guarantee provided by the company to its shareholders or actual controllers. According to Article 16, Paragraph 2 of the Company Law, a resolution of the shareholders' meeting or the general meeting of shareholders must be passed at this time. If the legal representative has not been resolved by the shareholders' meeting or the general meeting of shareholders, or only by the board of directors, the guarantee contract signed by the legal representative shall constitute ultra vires representative. Under the circumstance that the law is so clear, the counterparty that signs the guarantee contract without reviewing the resolution of the shareholders' meeting or the general meeting of shareholders is always a malicious counterparty, and there is no possibility of applying apparent representation.
The so-called non-affiliated guarantee refers to the guarantee provided by the company to a person other than the shareholder or actual controller. According to the provisions of Article 16, Paragraph 1 of the Company Law, the articles of association of the company shall stipulate whether the resolution of the shareholders' meeting (or the general meeting of shareholders) or the resolution of the board of directors shall be determined by the company. If the articles of association do not provide for it, the resolution of the board of directors or the resolution of the shareholders' meeting (or shareholders' meeting) is a qualified resolution; If the articles of association of the company stipulate that the resolution shall be made by the board of directors, the resolution of the shareholders' meeting is of course a qualified resolution according to the rule of interpretation of "the weight of the weight is the weight". It is worth discussing how to determine that the counterparty constitutes good faith if the articles of association stipulate that the resolution of the shareholders' meeting (or the general meeting of shareholders) is to be resolved, and the resolution of the board of directors is actually issued? There is a view that the counterpart only bears the obligation of formal examination, but does not have the obligation to review the charter, and according to Article 61, Paragraph 3 of the Civil Code, which stipulates that "the articles of association of a legal person or the legal person's authority shall not oppose the representative of the legal representative, it shall not be opposed to the bona fide counterpart", and therefore does not prevent the determination of the counterparty as bona fide. Another view is that the counterparty has a reasonable obligation to review, which of course includes the obligation to review the articles of association, and if the articles of association clearly stipulate that the external guarantee shall be resolved by the shareholders' meeting or the general meeting of shareholders, the legal representative only submits the resolution of the board of directors, and if the counterparty accepts it, it cannot be deemed to be a bona fide counterparty. On this issue, the Interpretation of the Guarantee System of the Civil Code does not simply follow the provisions of the Minutes of the Civil and Commercial Trial Conference on the fact that the counterparty only bears the obligation of formal examination, but stipulates that it has the obligation of reasonable examination, which obviously adopts the second viewpoint. The difference between the standard of formal examination and reasonable examination lies to a large extent in whether or not the statute should be reviewed, and special attention should be paid to this point.
Of course, as far as the review of the qualified resolution itself is concerned, the reasonable review can still only be a formal review, and it is difficult to require the counterparty to conduct a substantive review, after all, the counterparty is not an insider of the company, and it is difficult to understand the specific circumstances of the company's resolution. Therefore, the review of the company's resolution can only be a formal review, and the basic requirements include: first, to review whether the identity of the shareholders or directors is true; The second is whether the shareholders who should abstain from voting participate in the voting in the case of related guarantees. As for the company's defense that the creditor is not bona fide on the grounds that the resolution of the organ was forged or altered by the legal representative, the resolution procedure is illegal, the signature (name) is false, or the guarantee amount exceeds the statutory limit, the people's court will generally not support it, unless the company has evidence to prove that the creditor knew that the resolution was forged or altered.
3. Liability for ultra vires security
With regard to the liability for ultra vires guarantees, there is a view that Article 171, Paragraph 4 of the Civil Code should be applied by reference to the provisions of paragraph 4 of Article 171 of the Civil Code, which stipulates that "if the counterparty knows or should know that the actor has no authority to act as an agent, the counterparty and the actor shall be liable according to their respective faults". This view applies the rules of the Civil Code on non-authorized representation to ultra vires representatives. However, judging from the relevant expressions of the Civil Code, although there are many similarities between ultra vires representative and non-authorized agency, there are still differences between the two, so the ultra vires representative behavior cannot be completely explained by the non-authorized agency system. Specifically:
First, from the perspective of the expression of relevant authority. The Civil Code summarizes the lack of agency as no agency, exceeding the power of agency, and after the termination of the power of agency, while Article 504 of the Civil Code only has the expression "exceeding authority", and does not have the expression "no power of representation" or "termination of the right of representation".
The second is from the expression of the goodwill of the relative. With regard to ultra vires representation, Article 504 of the Civil Code only distinguishes between bona fide and malicious acts: in good faith, the contract is valid; If the contract is malicious, the contract is not effective against the company, and there is no difference between the invalid result, and the fault of the counterparty is not considered. However, judging from the provisions of Articles 171 and 172 of the Civil Code on non-authorized agency and apparent agency, it is actually distinguishing between three situations of non-authorized agency: the counterparty's bona fide non-authorized agency (Article 171, paragraph 3), the counterparty's malicious non-authorized agency (Article 171, paragraph 4), and the counterpart's bona fide and non-negligent apparent agency (Article 172). It can be seen that the rules for ultra vires representation and non-authorized representation are not completely consistent.
The third is from the perspective of the source of authority. According to paragraph 2 of Article 61 of the Civil Code, which stipulates that "the legal consequences of civil activities carried out by the legal representative in the name of a legal person shall be borne by the legal person", the legal representative may generally engage in civil activities on behalf of the company without additional authorization. Even if he engages in external acts beyond his authority, he is only a representative who exceeds his authority, not a representative without authority. In addition to the legal representative, the entrusted agent is generally authorized on a case-by-case basis, and the agent is very variable. In the absence of agency, the agent has no power of agency at all, and there is no connection between him and the so-called principal. For this reason, Article 504 of the Civil Code only provides for ultra vires representation, but not for non-authorized representation.
Fourth, from the perspective of whether it is an act of duty. The legal representative is the legal authority of the company, and its representative authority is derived from the express provisions of the law. Even if the legal representative engages in an act that is ultra vires, it is also an act of the company that is engaged in externally, which is essentially an act of performing duties, and even if the act of ultra vires does not have effect on the company, there is no basis for the legal representative to be personally liable. In the case of entrusting an agent, the authority of the agent comes from the authorization of the principal, and if it is not authorized by the principal, its behavior has nothing to do with the principal, and naturally does not take effect on the principal, but the agent itself should bear the responsibility.
It is precisely because of the aforesaid distinction between ultra vires representative and non-authorized agency that this article stipulates that even if it constitutes ultra vires guarantee, the company shall be liable for damages, which is in nature a liability for contractual negligence, and the normative basis is Article 62 of the Civil Code and Article 17 of the Interpretation of the Guarantee System of the Civil Code. The premise of the company's liability is that it is at fault, and the question is, is such fault the fault of the legal representative or the fault of the company itself? One view was that such a fault was the fault of the legal representative, and that the legal representative exceeded his authority and that the representative itself was at fault. Another point of view is that this kind of fault is the fault of the company itself, which is mainly manifested in the fault of the selection and supervision of the legal representative, as well as the fault of the management of the official seal. In our view, the Civil Code adopts a practical rather than a fictional theory for legal persons, and regards the legal representative as the organ of the legal person rather than an agent, so such fault should be the fault of the company itself rather than the fault of the legal representative.
According to the second sentence of Article 20 of the Minutes of the Civil and Commercial Trial Conference, the company shall not be liable as long as it provides evidence to prove that the creditor clearly knew that the legal representative exceeded his authority or that the resolution of the organ was forged or altered. We believe that as long as the legal representative fails to provide a qualified resolution, the counterparty should know that it has exceeded its authority to provide the guarantee, but this only indicates that the counterparty is malicious, and cannot further deduce that the company itself is not at fault. As long as the company is at fault, it should be liable, so the company cannot claim exemption solely on the ground that the counterparty knowingly exceeded its authority. It is worth discussing whether the company can be exempted from liability if the counterparty accepts the guarantee knowing that the resolution is forged or altered? There are differing views on this. There is a view that the company still cannot be exempted from liability, because the company will be liable without a resolution, and forging or altering the resolution is equivalent to no resolution; In addition, the forgery or alteration of the resolution shows that the legal representative or the company is still at fault, so it cannot be exempted from liability. In our opinion, if the counterparty accepts the guarantee knowing that the resolution is forged or altered, it can often be determined that the legal representative and the counterparty maliciously colluded to damage the interests of the company, and the company can be exempted from liability on this basis.
4. The company's recovery from the legal representative
Article 62 of the Civil Code stipulates that: "After a legal person bears civil liability, it may recover compensation from the legal representative at fault in accordance with the provisions of the law or the articles of association of the legal person." "According to the provisions of the Company Law on shareholder representative lawsuits, if a legal person refuses to file a lawsuit, other shareholders may file a shareholder representative lawsuit in accordance with such provisions. If the company is unable to liquidate and the creditor is unable to obtain compensation, can the creditor file a subrogation lawsuit against the legal representative? During the drafting process of the Interpretation of the Guarantee System of the Civil Code, there was a view that the creditor could file a subrogation lawsuit against the legal representative, but the Interpretation of the Guarantee System of the Civil Code did not adopt such a view. Because the right of subrogation refers to the creditor's subrogation of the creditor's claim against the secondary debtor in its own name when the debtor neglects to perform its claim against the secondary debtor. The premise for the exercise of subrogation is that the debtor's claim against the secondary debtor must be actual and mature. In the case of ultra vires guarantee, the company can only recover from the legal representative after assuming responsibility to the counterparty. In other words, when the counterparty claims compensation from the company, the company's claim against the legal representative does not actually exist, so there is no issue of subrogation.
[Practical issues]
1. When hearing a case in which a company provides a guarantee to others, should the people's court take the initiative to examine whether the company's legal representative constitutes a ultra vires guarantee
This is a difficult question, and the essence of the question is, when the creditor requires the company to bear the guarantee liability, should the people's court ex officio examine whether the creditor is in good faith? There are two situations: (1) If the guarantor does not appear in court to attend the trial, should it take the initiative to examine whether the creditor has good faith when signing the guarantee contract with the guarantor? (2) In the case of the guarantor's appearance in court, if the guarantor does not defend that its legal representative exceeds its authority to guarantee the guarantee, will the people's court review it ex officio?
We are inclined to believe that in the first case, even if the defendant guarantor does not appear in court, the people's court should ascertain whether the plaintiff creditor was in good faith when signing the guarantee contract as a basic fact, because it is the duty of the people's court to ascertain the basic facts of the case.
In the second case, if the defendant does not defend that its legal representative exceeds its authority to guarantee the guarantee, does the people's court find out ex officio? We are inclined to believe that the people's court has an obligation to ascertain the basic facts of the case. This basic fact should be ascertained in conjunction with whether the creditor is bona fide or not.
2. Whether a company with only executive directors still needs a resolution of the board of directors
Article 50 of the Company Law stipulates that "a limited liability company with a small number of shareholders or a small scale may have one executive director and no board of directors." An executive director may also serve as a general manager. The duties and powers of executive directors are stipulated in the articles of association. It can be seen that a company with a small number of shareholders or a smaller scale can not have a board of directors, and naturally there is no question of board resolution. In this case, since the powers of the executive directors are stipulated in the articles of association, if the articles of association stipulate that the executive directors enjoy the same powers as the board of directors, the executive directors have the right to decide whether to provide non-affiliated guarantees; If the articles of association do not provide for this, or if it is not equivalent to the powers of the board of directors, according to the legal theory that the articles of association cannot oppose the bona fide counterpart, the signature of the executive director still has the effect of a resolution of the board of directors. The question is, if the executive director is the legal representative himself, and only his signature as the legal representative is the signature, but not as the signature of the executive director, can it be deemed that he has exercised the powers equivalent to the board of directors? There are different understandings of this. From the perspective of respecting the corporate governance structure and maintaining the corporate guarantee system, we are inclined to believe that it still needs to be signed separately as an executive director, otherwise it cannot be considered to have the effect equivalent to a resolution of the board of directors.