Gazette Case: CNBM Group Import & Export Corp. v. Beijing Dadi Hengtong Trading Co., Ltd. and Others
The Company Law's rules on internal approval for external guarantees are, in principle, internal governance and authorization-control rules, and do not automatically invalidate the guarantee contract. If the counterparty neither knew nor should have known that the legal representative exceeded authority and carried out the necessary formal review of the apparent authorization documents, the counterparty may be protected as a good-faith third party, and the company may not rely solely on internal approval defects to defeat external transaction security.
Holding
The Company Law's rules on internal approval for external guarantees are, in principle, internal governance and authorization-control rules, and do not automatically invalidate the guarantee contract. If the counterparty neither knew nor should have known that the legal representative exceeded authority and carried out the necessary formal review of the apparent authorization documents, the counterparty may be protected as a good-faith third party, and the company may not rely solely on internal approval defects to defeat external transaction security.