First, perform review obligations carefully

1. Scope of review - Articles of association, corporate resolutions and other documents related to guarantees

The recently published books "Minutes of the Second Court of the Supreme People's Court Civil Trial Judges' Meeting - Pursuing the Jurisprudence Behind the Judgment" and "Minutes of the National Court Civil and Commercial Trial Work Conference in 2019" limit the scope of review to documents related to guarantees such as articles of association and company resolutions. Supreme Court decisions also typically limit the scope of review to articles of association and shareholder/board resolutions. In order to effectively prevent legal risks, it is recommended that in addition to reviewing the articles of association, resolutions of the board of shareholders/board of directors, the shareholder register, internal approval letter of the state-owned assets institution agreeing to guarantee (applicable when the company has a state-owned assets background) and other documents related to guarantee should be reviewed. It should be noted that if the listed company provides guarantees to the outside world and the counterpart conducts a formal review, the public disclosure announcement of the listed company shall prevail.

2. Degree of scrutiny - Maximum formal scrutiny

Whether it is the latest case of the Supreme People's Court, or the minutes of the meeting of the judges of the Second Court of the Supreme People's Court and the Minutes of the National Court Civil and Commercial Trial Work Conference in 2019, the degree of review is limited to formal review, and the contents that creditors must review include:

(1) Whether there are restrictions on the amount of a single guarantee and the resolution authority of the guarantee in the articles of association, whether the amount of a single external guarantee exceeds the provisions of the articles of association, whether the agreement on the guarantee resolution is made by the competent authority of the company, among which if the company provides a guarantee for the shareholders or the actual controller, it shall be examined whether it is resolved by the shareholders' meeting;

(2) Whether the adoption ratio of the resolutions of the shareholders' meeting/board of directors conforms to the majority voting principle stipulated in the Company Law or the articles of association. According to the provisions of Article 16 and Article 121 of the Company Law, if a company provides a guarantee for shareholders or actual controllers, the company shall be approved by more than half of other shareholders in general, and if the amount of guarantee for a listed company exceeds 30% of the total assets, it shall be approved by more than two-thirds of the voting rights held by the shareholders present at the meeting.

(3) Whether the voting personnel participating in the resolution are shareholders or directors as stated in the company's articles of association/register of shareholders;

(4) If the company provides a guarantee for the shareholder or the actual controller, whether the shareholder controlled by the guaranteed shareholder or the actual controller participates in the voting.

3. Other notes for review

       Although there are cases pointing out that the authenticity of the shareholder/director signature, signature, and company seal on the resolution of the shareholders' meeting/Board of directors do not belong to the scope of formal review ((2018) Supreme Law Minshen No. 206 Lux Lighting (China) Co., LTD., Guangdong NanyuanBank Co., LTD. Chongqing Shapingba Branch financial loan contract dispute retrial review and trial supervision civil ruling), However, in order to prevent risks to the maximum extent, it is recommended that the company require the guarantor company to provide the signature and signature of the shareholder/director on the resolution of the previous shareholders' meeting/board of directors and the company's seal on other guarantee documents for comparison.

As to whether the convening procedure of the shareholders' meeting/board of directors is legal and whether the resolution is revocable, invalid or invalid, it is still recommended that the enterprise require the shareholders' meeting, the board of directors and the company to confirm in writing that the convening procedure of the shareholders' meeting/board of directors is legal and the resolution is not revocable, invalid or invalid.

(1) Insert "procedural flawlessness" and "indemnity for breach of contract" clauses into the guarantee contract

It is suggested that enterprises include in the terms of the guarantee contract "The company undertakes to provide external guarantee has fulfilled the internal voting procedures prescribed by law or the articles of association, and has obtained the consent of the shareholders' meeting or the board of directors, and there are no procedural defects" and "If the guarantee is invalid due to the defects in the internal voting procedures of the company, resulting in losses to the guaranteed, The company undertakes to compensate for the loss and bear the liability for breach of contract."

(2) Insert "procedural flawlessness" and "indemnity for breach of contract" clauses into the guarantee contract

According to the latest opinion of the Supreme People's Court, if the company provides guarantee without the consent of the shareholders' meeting/board of directors, and the third party fails to fulfill the obligation of reviewing the form of review, the validity of the guarantee contract is pending, and the company ratifies it, the guarantee contract is valid. Therefore, for the non-standard guarantee contract that has been concluded, it is suggested that the enterprise should coordinate the shareholders' meeting/board of directors of the guarantor in time to ratify the guarantee contract and issue the corresponding resolution.

【 Case Study 】

The defendant Zhonghui Company borrowed money from Shaoguan Rural Credit Cooperative Association (hereinafter referred to as Rural Credit Cooperative), and entrusted the plaintiff to provide guarantee for the above loans. After negotiation between the plaintiff and the defendant Zhonghui Company, the plaintiff (Party B, the guarantor) and the defendant Zhonghui Company (Party A, the guarantor) signed a guarantee business Contract on July 26, 2016, agreeing that Party A intends to borrow money from the lending bank Rural Credit Cooperatives (hereinafter referred to as the creditor) and intends to sign a Fixed Assets Loan Contract (hereinafter referred to as: Master Contract), the term of which is from July 26, 2016 to July 26, 2017 (on the basis of bank promissory notes). Party B provides a guarantee guarantee to Party A and intends to enter into a Guarantee Contract with the creditor (hereinafter referred to as "Guarantee Contract") for the principal claim amount of RMB 4.37 million. Party A voluntarily provides counterguarantee to Party B.

The plaintiff (Party B and the authorized party) and the defendant Zhonghui Company (Party A and the authorized party) have also signed the Asset Disposal Authorization Agreement, which stipulates that Party B provides a guarantee for Zhonghui Company (hereinafter referred to as the borrower) to borrow RMB 4.5 million from Rural Credit Cooperatives (hereinafter referred to as the lending bank), and the borrower cannot repay the bank loan guaranteed by Party B on time. This Agreement shall come into force automatically if Party B only presents to Party A any documents which can prove that the Borrower is unable to perform this Agreement on time, such as the bank payment notice. This Agreement shall remain in force until two years after the expiration of the term of performance of the obligations under the principal contract of the Lender. When Party B needs to assume the guarantee liability, Party A authorizes Party B to auction directly or entrust an auction agency to auction, sell, discount, rent or otherwise dispose of all the property owned by the client. Party B shall be authorized to handle and sign relevant matters in auction, sale, discount or other legal ways and relevant documents required to be signed in the process (including but not limited to transfer of property rights, registration and cancellation of pledge, notarization and other entrustment procedures) on its behalf, and Party B shall have the right to delegate in handling the above matters. The proceeds obtained shall be kept by Party B or used by Party B to repay the loan of 4.5 million yuan guaranteed by Party B. All debts and expenses arising from Party B's guarantee and asset disposal shall be borne by Party A.

The legal representative of Taiyuan Company was Song Zicheng, and the shareholder was Zhonghui Company. On June 6, 2016, Taiyuan changed the industrial and commercial registration, the legal representative was changed to Chen Huiyan, and the shareholder was changed to Shaoguan Wenhua Equipment Leasing Co., LTD. The original legal representative of Guangdong Jinxiu Heshan Biotechnology Co., Ltd. is also Song Zicheng, and the shareholder is Zhonghui Company. However, on June 6, 2016, the company also changed its industrial and commercial registration, the legal representative was changed to Zhu Honglian, and the shareholder was changed to Shaoguan Wenhua Equipment Leasing Co., LTD. Guangdong Jinxiu Heshan Biotechnology Co., Ltd. changed its name to the current Yushun Company on February 27, 2017. Based on the above changes in industrial and commercial registration, the defendant Taiyuan Company and Yushun Company then raised objections to the authenticity of the official seal on the 2016 (Shaoding) anti-guarantee enterprise word No. 032 and No. 033 "Guarantee anti-guarantee Contract (Enterprise)" and applied for judicial authentication during the litigation. After examination, the court granted permission to appraise the above issues by selecting Guangdong Nantian Judicial appraisal Institute. At the request of the identification agency and the consent of the original and the defendant, the court took the official seal samples retained by the two defendants in the Public security management brigade of Shixing County Public Security Bureau as comparison samples (samples 1 and 2). On July 13, 2018, the Institute issued Yueannan [2018] Document No. 249 "Judicial Appraisal Opinion", and the appraisal opinion is: 1. The official seal of "Guangdong Jinxiu Heshan Biotechnology Co., LTD." at the end of "Party A (Seal)" on page 5 of the "Guarantee CounterGuarantee Contract (Enterprise)" numbered "2016 (Shaoxing Ding) Counterguarantee Enterprise Word No. 032" is not the same seal seal as the official seal of sample 1. 2. The official seal of Shixing County Taiyuan Food and Beverage Co., LTD., at the end of "Party A (Seal)" on page 5 of the Guarantee Counter-Guarantee Contract (Enterprise) numbered "2016 (Shaoxing) Counter-Guarantee Enterprise Word No. 033", is not the same seal seal as the official seal of Sample 2. The two parties have no objection to the appraisal opinion, but the plaintiff believes that Song Zicheng is the original legal representative of the defendant Taiyuan Company and Yushun Company, and Song Zicheng's behavior constitutes apparent agency, so it still requires the two defendants to bear the liability for payment.

The court held that the seals of the defendants Taiyuan Company and Yushun Company involved in No. 032 and 033 "Guarantee Counterguarantee Contract (Enterprise)" were confirmed by identification to be not the real seals of the two companies, and Song Zicheng was no longer the legal representative of the two defendants when the contract was signed, and he had no right to engage in any civil acts on behalf of the two defendants. The plaintiff also did not provide evidence to prove that Song Zicheng's signing behavior was authorized by the two companies. Therefore, the above two counter-guarantee contracts should not be regarded as the true intention of the defendant Taiyuan Company and Yushun Company, and have no legal effect on the two defendants, so the court does not support the lawsuit request of Dingsheng Company to require the defendant Taiyuan Company and Yushun company to bear joint and several liability for the above debts. As for the plaintiff Dingsheng Company's claim that Song Zicheng's behavior has constituted apparent agency, the court held that the plaintiff, as a professional financing guarantee company, has the obligation to strictly examine the corresponding guarantee and the subject and property of the counter-guarantee when providing guarantee and counter-guarantee to the outside world, but the plaintiff did not require the two defendants to provide shareholders' meeting resolutions and power of attorney in this process. It was also not verified whether Song Zicheng is still the legal representative of the two companies. In addition, the two defendants have changed the industrial and commercial record registration on June 6, 2016, and the plaintiff is fully qualified to inquire about it, and it is subjectively negligent. Therefore, the representation requirement should not apply in this case.

The former senior executives of the company forged the company seal and signed an agreement or provided a guarantee in the name of the company, which is relatively common in commercial activities. The core legal issue involved in this kind of behavior is: how high the examination obligation of the other party to the company seal is. In response to these two questions, this case gives corresponding answers: Generally speaking, for legal acts such as guarantee or counter-guarantee, the severity of the examination obligation to the other party of the agreement depends on the identity of the other party on the one hand, and on the other hand depends on the difficulty of obtaining the facts to be examined. The case of Shaoguan City Dingsheng Financing Guarantee Co., LTD., as a long-term external guarantee or counter-guarantee enterprises, its review obligations are higher than other enterprises. The facts to be examined should include public information such as whether the company seal is real and who the legal representative of the enterprise is. Combined with the above content, Shaoguan Dingsheng Financing Guarantee Co., Ltd. failed to fulfill the most basic review obligations, and the guarantee agreement was found to be invalid, which is not difficult to understand.