[Direct answer]In the Beijing area, the effectiveness of guarantees may vary depending on the circumstances. When a company provides guarantees for others, it shall, in accordance with the provisions of the company's articles of association, be decided by the board of directors or the shareholders' meeting or the general meeting of shareholders. If the company's legal representative provides guarantees without authorization or beyond his or her authority, it constitutes an act of overstepping his or her authority. If the counterparty is in good faith, that is, he or she has conducted a reasonable review of the company's resolutions and has reason to believe that the representative's act is effective, the guarantee contract is valid and the company shall bear the guarantee liability; if the counterparty is not in good faith, the guarantee contract shall not be effective against the company, and the company shall not bear the guarantee liability, but may bear corresponding compensation liability according to the degree of its fault. Therefore, whether the company's guarantee is effective without a shareholders' resolution depends crucially on whether the counterparty is in good faith, whether he or she has fulfilled his or her obligation of reasonable review, and whether the guarantee belongs to special circumstances such as related-party guarantees.

I. Problem Background and Typical Scenarios

The company provides guarantees for affiliated enterprises or others' loans, but disputes arise afterwards due to the failure to implement the internal resolution procedures. The creditor claims that the guarantee is valid and requires the company to assume responsibility, while the company argues that the guarantee is invalid without the resolution of the shareholders' meeting. Similar disputes over unauthorized guarantees are very common in practice. How to determine the validity of the guarantee and who should bear the losses depends on the counterparty's obligation to review and their state of good faith.

II. Key points of contention

First, the requirements for the company's resolution on providing guarantees to third parties. Second, the determination of the validity of the legal representative's guarantee beyond his authority. Third, the standard for judging the good faith of the counterparty. Fourth, the company's liability for compensation when it does not assume the guarantee responsibility.

III. Professional analysis by Henglue Lawyers

Firstly, the resolution requires that: when the company provides guarantees for others, it shall be decided by the board of directors or the shareholders' meeting or the general meeting of shareholders in accordance with the company's articles of association; when the company provides guarantees for shareholders or actual controllers, it must be decided by the shareholders' meeting or the general meeting of shareholders, and the shareholders who are guaranteed or controlled by the actual controllers shall not participate in the voting. Secondly, the effectiveness of over-authority guarantees: if the legal representative provides guarantees beyond his authority and the counterparty is in good faith, the guarantee contract is valid and the company shall bear the guarantee liability; if the counterparty is not in good faith, the guarantee contract shall not be effective against the company, and the company shall not bear the guarantee liability. Thirdly, the determination of good faith: the counterparty shall conduct a formal review of the resolution, consult the company's articles of association, and check the resolution-making body and voting requirements. In particular, for related-party guarantees, it is necessary to review whether the resolution has been passed by the shareholders' meeting. If the counterparty fails to fulfill its review obligations, it will generally be difficult to determine good faith. Fourthly, liability assumption: if the guarantee contract is not effective against the company, the company shall not bear the guarantee liability, but may bear corresponding compensation liability according to its fault; if the creditor is also at fault, the company's liability may be reduced. Henglue advises that: before accepting the company's guarantees, the creditor should verify the articles of association and resolutions, and the company should also standardize the management of seals and authorizations to prevent the risk of over-authority guarantees at the source.

IV. Practical suggestions and legal basis

The first step is for the creditor to verify the provisions on the decision-making authority for guarantees in the company's articles of association before accepting the company's guarantee. The second step is to check whether the decision-making body, voting ratio, and signatures of the guarantee resolution comply with regulations. Related guarantees must be approved by the shareholders' meeting. The third step is to retain the original resolution, articles of association, and authorization documents to prove that the counterparty has fulfilled its due diligence obligation. The fourth step is to claim good faith or the company's fault in the event of a dispute, and, if necessary, to determine the allocation of responsibilities through litigation. The main legal basis includes the provisions on company guarantee resolutions in the Company Law of the People's Republic of China (amended in 2018), Articles 61 and 504 of the Civil Code of the People's Republic of China (effective as of January 1, 2021), and the judicial interpretations on the application of the guarantee system in the Civil Code. The specific application shall be subject to the currently effective provisions.

5. Henglu Law Firm's Reminder

There are three key points regarding the legal effect of corporate guarantees: 1. External guarantees must be approved by the board of directors or shareholders' meeting in accordance with the company's bylaws. 2. If the legal representative exceeds his authority in providing a guarantee, the transaction will be valid if the counterparty acted in good faith, but will be ineffective if the counterparty acted in bad faith. 3. Even if the company is not held liable, it may still be required to compensate for damages based on its negligence. For disputes involving corporate commercial and guarantee matters, the parties may seek resolution through legal channels.Business and contract disputes in enterprisesFor services involving overall solutions related to corporate law and compliance, we can provide integrated support.Intellectual property and corporate lawFor cases involving creditor's recourse and enforcement, you may refer to the following documents for reference:Creditor's rights and debts, and enforcementFor any questions or difficulties, please feel free to consult us.Special servicesTeam.

VI. Frequently Asked Questions

Q1: Is the guarantee valid without a resolution?

Not necessarily. If the legal representative guarantees beyond his authority, the guaranty contract signed by the counterparty in good faith is valid; but the guaranty signed by the counterparty in bad faith will not be effective against the company, which depends on whether the counterparty has fulfilled its obligation of reasonable review.

Q2: What is a bona fide third party?

It means that the counterparty has conducted a formal review of the company's resolutions, checked the articles of association and voting requirements, and has reason to believe that the legal representative has the right to provide guarantees on behalf of the company. Moreover, the counterparty has kept the corresponding review materials.

Q3: What should I pay attention to when providing a guarantee for a related party?

The company must obtain the resolution of the shareholders' meeting or the general meeting of shareholders before providing guarantees for shareholders or actual controllers. Moreover, the shareholders who are guaranteed or controlled by others shall not participate in the voting. The counterparties should conduct a thorough review of this matter.

Q4: Does the company not bear any responsibility and still have to pay compensation?

If the guarantee is not effective against the company, the company shall not bear the guarantee liability, but may bear the corresponding compensation liability according to its fault; if the creditor is at fault, the company's liability may be correspondingly reduced.

Q5: How to prevent it?

The company should standardize the management of seal approval, authorization, and guarantee approval. Creditors should review the articles of association and resolutions and keep the materials before accepting the guarantee, so that both parties can jointly reduce the risk of over-authorization of guarantees.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudication standards in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Corporate commercial legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If a dispute arises, please consult a practicing lawyer in time.