8 - The Presumption of Regularity in Chinese Corporate Contracting: Evidence and the Prospect of Regional Convergence

Summary

When entering into transactions, a company acts through individuals. A transaction purportedly made in the name or on behalf of the company, however, may not be duly authorized. An issue that courts often confront is therefore the enforceability of corporate contracts not duly authorised. A decision on this issue allocates the risks for corporate transactions to either the company or the person seeking to deal with it. This issue is resolved at the common law, as well as statutorily using the “indoor management rule”, which is a ‘presumption of regularity’, supplemented by the doctrines of actual and apparent authority. In the People’s Republic of China, the courts are less well equipped. The PRC legal framework does not provide for a presumption of regularity. PRC Company Law art. 16, which has been enacted to regulate corporate transactions that gives a security, is silent on third-party rights and precludes the operation of the rules on apparent authority. This chapter explores the possibility of completing a nascent presumption of regularity evidenced in the PRC courts adjudication of art. 16 cases, using the common law IMR as a model.