March 2018
Under the legal theory that a lighter offense should be cited to illustrate the culpability of heavier offenses, when a company is specifically prohibited to provide any guarantee under the law, the company is also prohibited from assuming any debt (Taiwan)
2017.11.29
Angela Wu
The Taiwan High Court rendered the 106-Shang-707 Civil Decision of November 29, 2017 (hereinafter, the "Decision"), holding that under the legal theory that a lighter offense should be cited to illustrate the culpability of heavier offenses, when acompany is specifically prohibited to provide any guarantee under the law, the company is also prohibited from assuming any debt.
According to the facts underlying this Decision, the Plaintiff asserted that since Company A had been maliciously closed down in November 2011, the promissory note issued by Company A and obtained by the Defendant to obtain a promissory note adjudication for incorporation into the enforcement matter at issue was falsely issued after the fact. Therefore, the Plaintiff brought suit against the distribution table on the ground that the promissory note claim did not exist and could not participate in the distribution. The original trial court rendered a decision in which the Defendant's claim was removed. Dissatisfied, the Defendant appealed.
According to the Decision, Article 16, Paragraph 1 of the Company Law provides that except when a company may provide a guarantee under other laws or its articles of incorporation, the company shall not serve as any guarantor. Since guarantee is prohibited by law, the assumption of a debt, which incurs more liabilities, is certainly also prohibited by the above provision. In addition, Article 14 of Company A's articles of incorporation specifically provides that "the Company may provide external guarantee to satisfy its business needs." Therefore, Company A's external guarantee should be limited to an extent related to its business. Besides, the individual companies affiliated with its group are different juristic persons with their separate assets. Therefore, they cannot freely and generally assume any debt of another company or even of any individual.
In this case, the promissory note at issue was issued neither to repay the debt of Company A nor to execute Company A's business nor to satisfy its business needs. Therefore, the act of issuing a promissory to assume or guarantee a debt should not be effective to Company A. Since the holder of the promissory note had no other evidence that substantiated the existence of the promissory note claim, the finding that the claim should be removed was not unlawful. Therefore, the Defendant's appeal was rejected. This case was still appealable.
Angela Wu
The Taiwan High Court rendered the 106-Shang-707 Civil Decision of November 29, 2017 (hereinafter, the "Decision"), holding that under the legal theory that a lighter offense should be cited to illustrate the culpability of heavier offenses, when acompany is specifically prohibited to provide any guarantee under the law, the company is also prohibited from assuming any debt.
According to the facts underlying this Decision, the Plaintiff asserted that since Company A had been maliciously closed down in November 2011, the promissory note issued by Company A and obtained by the Defendant to obtain a promissory note adjudication for incorporation into the enforcement matter at issue was falsely issued after the fact. Therefore, the Plaintiff brought suit against the distribution table on the ground that the promissory note claim did not exist and could not participate in the distribution. The original trial court rendered a decision in which the Defendant's claim was removed. Dissatisfied, the Defendant appealed.
According to the Decision, Article 16, Paragraph 1 of the Company Law provides that except when a company may provide a guarantee under other laws or its articles of incorporation, the company shall not serve as any guarantor. Since guarantee is prohibited by law, the assumption of a debt, which incurs more liabilities, is certainly also prohibited by the above provision. In addition, Article 14 of Company A's articles of incorporation specifically provides that "the Company may provide external guarantee to satisfy its business needs." Therefore, Company A's external guarantee should be limited to an extent related to its business. Besides, the individual companies affiliated with its group are different juristic persons with their separate assets. Therefore, they cannot freely and generally assume any debt of another company or even of any individual.
In this case, the promissory note at issue was issued neither to repay the debt of Company A nor to execute Company A's business nor to satisfy its business needs. Therefore, the act of issuing a promissory to assume or guarantee a debt should not be effective to Company A. Since the holder of the promissory note had no other evidence that substantiated the existence of the promissory note claim, the finding that the claim should be removed was not unlawful. Therefore, the Defendant's appeal was rejected. This case was still appealable.
