Chinese and Comparative Company Law - Assignment Example

Topic: Chinese and Comparative Company Law (Company Constitution Do you think the constitutional documents in common law country and in China of a company should be seen as a contract between the company and the directors Your reasons for common law country and China In consideration of the constitutional documents in common law country and in China with regards to a contract between the company and the directors, it is necessary to establish the common law context. Ohnesorge (2003) suggested that due to the inherent complexity of law and economic development, including issues of heterogeneity and uncertainty, significant effect of common law legal systems originating from England and civil law systems from Continental Europe have faded in importance. Nevertheless, some generally accepted knowledge includes that of constitutional document sometimes referred to as charter or agreement which is a certificate characterizing the existence of the entity which the law recognizes and allows acting as natural persons and regulating the structure and control of the entity and its members. It was generally accepted that the specific form of the constitutional documents depends upon the type of entity (Djankov, et al, 2002). On one side of the fence, common law is a system of law whose sources are the decisions in cases by judges. Besides, every system will have a legislature that passes new laws and statutes, nevertheless, these do not modify a collected and codified body of law. Common law comes from England and was passed on to Commonwealth countries, and almost every former colony of the British Empire (except for Malta and Scotland ). Furthermore, it is currently observed in, United Kingdom (excluding Scotland), United States (excluding Louisiana) Canada (excluding Quebec), Ireland, Australia, India, South Africa, and Hong Kong and in some other countries. In addition to these countries, several others have adapted the common law system into a mixed system. For instance, India, Pakistan, and Nigeria function largely on a common law system, however, incorporate religious law (Coffee, 2001). Likewise, company refer to a separate legal entity, as in English law, or may simply refer to a business, as is the common use in the United States. In addition, a company may or may not be a separate legal entity. Any business or commercial economic activity may be referred to as a company; examples of this include "my company", "our company", "the company", and "their company". A corporation may accurately be called a company; nonetheless, a company should not necessarily be called a corporation, which has discrete characteristics. According to Black's Law Dictionary, in the U.S. a company could be a corporation, less commonly, an association, partnership or union, carrying industrial enterprise. Contract is a legally required trade of promises or an accord between parties that the law will implement. Contract law is based on the Latin phrase "pacta sunt servanda" literally, promises must be held in reserve. Breach of a contract is acknowledged by the law and remedies can be provided as many people make contracts everyday. Most of the times, written contracts are mandatory such as when buying a house. On the other hand, the enormous majority of contracts can be and are made orally, like the process where a vendor guarantees the material bought by a customer. Contract law is classified as part of a general law of obligations under civil law systems (La Porta et al, 1998). Therefore, it may be acceptable in China that constitutional documents in common law country may be seen as a contract between the company and the directors, but not in exact acceptable practices. This is so because one of the more prevalent reasons enterprises has second thoughts about doing business in China had been legal in context as there are no established laws that actually guard and protect the interests of investors (Ahlstrom, Nair, Young, 2003). While some countries adopt common law legal systems, judges have the authority and duty to decide what the law is when there is no other authoritative statement of the law. The common law forms a major part of the legal systems of those countries of the world with a history as territories or colonies of the British Empire, but in China, although it was acknowledged that economic planners have reduced bureaucratic government control over private enterprises (Nolan, 2001), careful research and analysis as well as disclosures of executives denote the "absence of well established legal system and regulatory regime, the reduction of the central government's bureaucratic influence has created feudalistic pressures," (Ahlstrom et al, 2003). 2. Can the constitution of a company incorporated in PRC be viewed as a contract Why Why not Please use relevant cases to support your argument. China's business, financial and commercial law transition and evolution is one of the more complex legal systems in the global context as it has been described to be evolving in piecemeal fashion and there are perceived impediments as to the availability of literature on actual legal cases in China outside of its jurisdiction. Elsewhere, it is recommended that most common law jurisdictions divide the constitutional documents of companies into two separate documents: the Memorandum of Association or the Articles of Incorporation which is the primary document, and will generally regulate the company's activities with the outside world, such as the company's objects and powers and the Articles of Association or by-laws which is the secondary document, and will generally regulate the company's internal affairs and management, such as procedures for board meetings, dividends, entitlements etc. In the case of some countries, only the primary document is filed, and the secondary document remains concealed. However, in other countries, both documents are filed (Wikipedia, 2007). In China, since there is an overwhelming aim of the government to uphold the benefit of the people, there are conflicting issues as to the legal powers or liabilities of a company, especially a foreign one. Likewise, as transparency is still an issue with PRC's governance, most legal documentaries are through sources that cannot be specified, such as a claim that, "When we first came to China local officials gave us a list of items we had to buy to meet safety regulations. Naturally, we trusted the officials and not wanting to rock the boat, we made the purchases ... Later we learned that it had not been necessary to invest so much in the safety items, rather a local official was interpreting the regulations to favour a relative of his, who sold us some of the items," (qtd. Ahlstrom et al, 2003). 3. Why is it necessary to determine the legal nature of the constitution of a company incorporated in China. Please use relevant cases to support your argument Ohnesorge (2002) noted that there are plenty of developing countries that have more sophisticated legal systems which have not matched China's economic achievements but it was obvious that the formal legal system of China cannot substitute for political commitment. It was suggested further that political power holders resist relinquishing control over the development of legal doctrines to judges which is noted to be integral to the common law tradition (Ohnesorge, 2003). Already, reasons were blatantly presented as "they have no material incentive to share political power by creating an independent power center in the courts, but in terms of outlook [] predisposed to confident instrumentalism when it comes to law," (p 491). The Law of the People's Republic of China is commonly accepted as the legal regime of the People's Republic of China, with the separate legal traditions and systems of Mainland China, Hong Kong, and Macao. China has a tradition of adopting civil law systems but on the other hand, Hong Kong still retains the common law system inherited as a former British colony, while Macao employs a legal system based on that of Portuguese civil law. This is part of the "One Country, Two Systems" theory. They have their own courts of final appeal and extradition policies. As such, they are not within the jurisdiction of the court system within People's Republic of China, which is only effective within mainland China, but their basic laws are subject to the interpretation power of the Standing Committee of the National People's Congress (Wikipedia, 2007). Reference: Ahlstrom, D. and Bruton, G.D. (2001, November). Learning from successful local private firms in China establishing legitimacy. Academy of Management Executive. Djankov, S., La Porta, R., Lopez-de-Silanes, F., Shleifer, A. (2002). "Courts: The Lex Mundi Project (Discussion Paper No. 1951). Harvard Institute of Economic Research. La Porta, R., Lopez-de-Silanes, F. Shleifer, A. and Vishny, R. (1998). "Law and finance." Journal of Political Economy 106 (6) 1113-1155 Nolan, P. (2001). China and the global economy: National champions, industrial policy, and the big business revolution. New York, NY: Palgrave Ohnesorge, J. (2002). "The rule of law, economic development, and the developmental states of northeast Asia." Law and development in East and Southeast Asia 91, 127. Routledge. Ohnesorge, J. (2003). "China's economic transition and the new legal origins literature." China Economic Review 14, 485-493. Wikipedia. (2007). "Peoples Republic of China,", "Constitutional Documents", "Common Law." From wikipedia.org Read More