Before 2019, because the Supreme People's Court did not maintain a relatively consistent calibre when determining the effectiveness of external guarantee contracts, the determination of the effectiveness of external guarantee of companies has become a problem that has plagued judicial practice for a long time. Until July 3, 2019, Liu Guixiang, a deputy ministerial-level full-time member of the Supreme People's Court Adjudication Committee, delivered an important speech at the National Court civil and commercial trial work Conference, giving clear guidance on the adjudication standards for a number of controversial issues such as judicial judgment on the validity of guarantee contracts. After the meeting, the Second Civil Court of the Supreme People's Court issued the Minutes of the National Court Civil and Commercial Trial Work Conference, which clarified the rules for determining the validity of companies' foreign guarantee contracts. According to the above minutes, the Supreme People's Court has basically formed the view that "the guarantee contract signed by the legal representative without the resolution of the shareholders' meeting or the shareholders' meeting, the board of directors and other company organs is in principle a contract with no right to represent, and without the company's ratification, it should be deemed invalid according to law". Specifically, the relevant content should focus on the following aspects:

1. If the object of guarantee is the shareholder or actual controller of the company, the guarantee contract must be approved by the shareholders' meeting or the shareholders' meeting. Without a resolution of the shareholders' meeting or the shareholders' general assembly, or only a resolution of the board of directors, a guarantee contract signed externally still constitutes an unauthorized representative.

2. If the object of guarantee is another person, whether the resolution of the shareholders' meeting or the general meeting of shareholders or the resolution of the board of directors shall be stipulated in the articles of association of the company; Where there is no provision in the articles of association, a resolution of the board of directors or the shareholders' meeting or the shareholders' general meeting may serve as a valid basis for the act of a representative; The articles of association provide that the resolution of the shareholders' meeting or the general meeting of shareholders, and the resolution of the board of directors of the company agreeing to provide security constitute powerless representation. However, in view of the provisions of the articles of association against a bona fide counterpart, the bona fide counterpart may claim the validity of the security based on the apparent representation rule. However, this rule is not absolute. If there are any of the following circumstances, even if there is no company resolution, the guarantee shall be deemed to be in line with the true intention of the company and thus the guarantee shall be deemed valid:

(1) The company is a guarantee company whose main business is to provide guarantees for others, or a bank or non-bank financial institution that carries out independent guarantee business;

(2) There is a commercial cooperative relationship between the company and the principal debtor, such as mutual guarantee;

(3) The Company provides guarantees to creditors for the business activities of the company under its direct or indirect control;

(4) The act of providing security for others (excluding shareholders or actual controllers) is carried out individually or jointly by shareholders holding more than 50% of the voting rights of the company.

3. Regarding the examination obligation of the counterpart, according to the spirit of the latest judicial interpretation, the doer provides guarantee without the company's resolution, and the counterpart can prove that it has reviewed the company's articles of association, resolutions and other documents related to guarantee when concluding the guarantee contract. If the contents recorded in the documents conform to the provisions of Article 16, 104, 121 and other laws of the Company Law, it shall be deemed to constitute a demonstrative representative or demonstrative agent, and the company shall bear the corresponding responsibilities. If the company makes a defense on the grounds that the relevant resolution is forged or altered by the actor, the procedure for forming the resolution is illegal, the signature is untrue, and the guarantee amount actually exceeds the statutory guarantee limit, the people's court will not support it. However, in any of the following circumstances, it indicates that the counterpart has not fulfilled the obligation of examination, and the apparent representation rule is not applicable: the resolution agreeing to the guarantee is made by the agency that the company has no right to make the resolution; The security resolution has not been adopted by law or the articles of association; The shareholders or directors participating in the resolution have violated the provisions of Article 16 (3) or Article 124 of the Company Law on withdrawal from voting; The personnel involved in the resolution do not conform to the company's articles of association, business license records, etc.

4. As for the legal consequences and remedies for the invalidation of the guarantee contract, in current judicial practice, it is believed that if the actor has exceeded his power to provide guarantee without ratification by the company and does not constitute a apparent representative or apparent agent, and the counterpart claims that the actor should bear the corresponding responsibility, the liability of the actor should be determined according to the provisions of Article 171 of the Civil Code. If the counterparty, at the time of concluding the guarantee contract, knows that the guarantee act has not been resolved by the Company, or is able to determine that the counterparty and the doer transfer commercial risks to the Company through the guarantee contract, the counterparty may bear the corresponding losses by itself. If the opposite party is unable to provide evidence to prove the actor who concluded the guarantee contract with it, its claim shall be rejected by judgment.

【 Case Study 】

On June 10 and 11, 2014, Li Jun paid one promissory note each to Jiangsu Jingwei Real Estate Co., LTD. (hereinafter referred to as Jingwei Real Estate Co., LTD.), with the amount of 10 million yuan and 6 million yuan respectively. The two promissory notes were recorded as Jingwei Real Estate Co., LTD. Jingwei Real Estate Company issued a receipt to Li Jun on the day of receipt of the promissory note to explain the receipt of the loan of 10 million yuan and 6 million yuan. On June 11, 2014, Jingwei Real Estate Company issued an IOU to Li Jun, the content of which was: "Borrow Li Jun RMB 16 million yuan, the loan period is three months, the interest is calculated at 3.5% per month, and the principal and interest will be repaid at maturity." After the expiration of the loan term, Jingwei Real Estate Company failed to return the principal of the loan, and only returned the interest on the loan as of December 11, 2014. On December 19, 2014, Jingwei Real Estate Company returned the principal of 4.5 million yuan, the remaining 11.5 million yuan and interest could not be paid, Li Jun then sued Jingwei Real Estate Company to Nanjing Qinhuai District People's Court.

It was also ascertained that on June 11, 2014, the Classical Garden Company issued a "Guarantee Commitment Letter" to Li Jun, stating: Jingwei Real Estate Company borrowed 10 million yuan from Li Jun on June 10, 2014 and 6 million yuan on June 11, 2014 to repay the bank loan, agreeing on a monthly interest rate of 3.5 percent to Li Jun, and the return period is 10 million yuan on September 10, 2014 and 6 million yuan on September 11, 2014. The promisor voluntarily provides joint and several liability guarantee to Li Jun for the above debts. The purpose of the loan and the possible legal consequences of providing joint and several liability guarantees have been known to the promisor. Guarantor commitment: If the borrower fails to perform the debt, the guarantor shall bear the joint and several liability for repayment, and the scope of guarantee of the guarantor shall include but not limited to the loan principal, loan interest, lawyer's fee, notary's fee, legal costs and other expenses for realizing the creditor's right. The guarantee period is 2 years from the maturity of the debt. The Guarantee Commitment Letter is also stamped with the official seal of Classical Garden Company and the personal seal of Zhao Ji, the legal representative.

The focus of the dispute in this case, that is, whether the "guarantee commitment Letter" involved in the case has legal effect on the classical garden company? The court held that although the Letter of Guarantee Undertaking involved in the case had not been resolved by the shareholders' meeting, the legislative arrangement stipulating in Article 16 of the Company Law of the People's Republic of China that limits the guarantee authority of the legal representative by way of resolution is intended to ensure that the guarantee behavior conforms to the will of the company and does not damage the interests of the company and shareholders. At the time of the loan in this case, Jingwei Construction Group was the sole shareholder of the guarantor Classical Garden Company and the absolute controlling shareholder of the borrower Jingwei Real Estate Company. In fact, the Classical Garden Company provided a guarantee for the debt of another company controlled by its shareholder Jingwei Construction Group, and the guarantee did not damage the interests of Classical Garden Company and its shareholder Jingwei Construction Group. The shareholders of Jingwei Construction Group are An Jiang and his daughter An Yingxiao; the executive director and general manager are An Jiang; the chairman of Classical Garden Company is An Jiang; the chairman and general manager of Jingwei Real Estate Company is also An Jiang; in fact, An Jiang is the actual controller of the entire associated enterprise. It is in the interests of each company to provide mutual guarantees based on the relationship between Jingwei Construction Group and other affiliated companies controlled by Anjiang. The court found that the "guarantee commitment Letter" involved in the case was the true intention of the classical garden company, and the classical garden company should bear the guarantee responsibility.

In the past, there was a traditional view that the prerequisite for a company to assume a guarantee externally was that the guarantee had to be passed by a resolution of the shareholders' (large) meeting, and the guarantee agreement without the resolution should be invalid. But in this case, the court found that the security agreement was valid without resolution. In response to this determination, the court interpreted the relevant legal provisions through the legislative intention: the holding company of the two companies providing mutual guarantees in this case is the same, and the holding company has absolute control over the two companies, in this case, the two security agreements will not affect the basic rights and interests of the holding company, so it should not be deemed invalid. Through this case, it should be noted that law is not a dead thing, judges are not mechanical in hearing cases and determining right and wrong, and social life cannot be adjusted immutable through fixed and rigid rules. Every legal provision has its original intention and intention, and if it violates the original intention and legislative intention, it should be regulated.