As these measures are exceptional from guarantee, loan, pledge and other conventional guarantee measures unique in the Security Law, listed corporations generally lay off inner decision and data disclosure procedures required for imparting safety for others. This article explores the impact of quasi-security measures adopted by using listed businesses without internal decision, with the aid of analysing their nature. Provisions of quasi-security measures usually country as follows: “The character obliged for pinnacle-up agrees to take the pinnacle-up duty to the creditor in appreciate of the debt reimbursement liabilities of the debtor,” or, “the person repaying the debt in the area of the debtor shall fulfil corresponding liability of debt repayment within the area of the debtor underneath the condition that the debtor fails to pay off the debt”. Controversies get up over the legal impact of those expressions in each principle and judicial exercise. A variety of theories, together with the guarantee concept, the debt accession concept and independent settlement theory, are evolved in respect of the nature of quasi-security features. Different understandings in their nature affect the willpower of their effect. Guarantee idea.
As a mainstream view, it defines quasi-safety features as a kind of assure. If a listed business enterprise is to provide a assure to some other organisation, it have to publish the notion to its board of directors, or its trendy assembly of shareholders, for deliberation and resolution, and timely divulge the information in newspapers and magazines precise by way of the CSRC (China Securities Regulatory Commission) in step with the provisions of the Company Law, the Circular of CSRC on Regulating the External Securities Provided with the aid of Listed Company, and other relevant laws and guidelines. There isn’t any consensus, but, approximately the impact of guarantee supplied with the aid of indexed agencies without resolution in judicial exercise.
There is a view that the above-referred to provision is administrative, instead of mandatory, and will not invalidate a contract as a end result. For this motive, in exercise, most courts hold that such security contracts made without decision are effective. Another view holds, based on the attention to the requirements for bona fide counterparty inside the Contract Law, that listed companies are open, and the counterparty has the benefit to study the choice-making strategies of a indexed organisation. Especially, if a financial group, certain by using the obligation of “understanding”, fails to meet due diligence, it’d be tough to show that the monetary group acts with bona fides. As a end result, article 50 of the Contract Law need to follow and the employer can be launched from the security legal responsibility. Independent agreement idea. This principle defines quasi-safety features as a form of independent contractual liability. They constitute the legal responsibility of direct payment by using the obligor to the creditor beneath the agreed situations, and aren’t subordinate to, or dependent on, some other antecedent liabilities. In the judgment of one case, Beijing Second Intermediate People’s Court held that the Co-operation Framework Agreement, which contained top-up contents in the case, was a lawfully formed agreement. The contents of the contract have to be deemed legitimate as it did not violate any mandatory provisions of legal guidelines or administrative guidelines of China. In the event that quasi-security measures are defined as independent contractual liabilities, their effect will now not be laid low with the defects of antecedent money owed based on the independence of contractual liabilities. As long because the instances of void contracts underneath article fifty two of the Contract Law do now not exist, the quasi-security features could be powerful. In the meantime, the laws and guidelines do no longer mandatorily offer for the resolution and disclosure methods of indexed businesses for execution of contracts. Given this situation, the quasi-safety features furnished through indexed businesses without decision are not defective in effect. Debt accession idea. Debt accession, additionally known as concurrent debt assumption, is normally a theoretical concept. In judicial practice, handiest the High People’s Court of Jiangsu Province elaborated in detail in one summary of discussions, in 2005, that “debt accession refers back to the debt assumption with the aid of which a 3rd celebration, the creditor, and the debtor attain a tripartite agreement, or the 1/3 birthday party and the creditor attain an settlement, or the 0.33 party unilaterally covenants to the creditor, to repay the debt of the debtor, with out releasing the debtor from fulfilment of its liabilities”. Some courts keep of their judgments that the letter of commitment that contains commitment to paying the principal and income entails the promise to take part inside the compulsory relationship, and therefore constitutes debt accession. In the occasion that the quasi-security measure is described as debt accession, the debt can be assumed by way of or more co-borrowers in preference to one debtor. As the new debtor concerned assumes duty for its debt, the debt accession settlement is an unbiased settlement in nature. As discussed above, in the event that the quasi-safety features are described as debt accession, they’ll be effective despite the fact that they may be now not difficulty to resolution of the indexed businesses. As the safety in cover furnished with the aid of listed businesses via quasi-security measures to keep away from resolution tactics grows in size, it is of practical significance to have a correct knowledge of the character and effect of such quasi-safety features, so that you can shield the hobbies of shareholders of listed groups and secured pursuits of creditors. More quasi-safety features of different paperwork will emerge below the pressure of big call for. We count on a consensus on such quasi-security features via sizeable dialogue, and also anticipate correction and development of transaction structures inside the destiny through judicial decisions.