Legal representative is a concept that comes from China’s company law. Every business established in China, whether domestic or foreign, is required to have one. This person is the main principal of the company who has the power to bind the company in contracts and also represents the company in submitting reports to regulators. But this position has nothing to do with the management of the company.
The company is managed by the board of directors, the general manager and the senior management. Thus, liability does not accrue to the legal representative simply from his or her status as the legal representative. Though many believe that the legal representative is responsible for all the liabilities of the company, this is simply not true.
Requirements on Legal Representative Selection
The PRC Company Law does not impose any restrictions on the nationality of the legal representative and the selected individual could effectively be the resident of any country.
The China company legal representative can feasibly be anyone from the company. When choosing a legal representative for the first time, foreign investors typically choose either an existing employee or a new Chinese recruit. Selecting an existing employee is often the favored route as the individual is familiar with the company’s culture and can be trusted and relied upon. Importantly, foreign investors should select their legal representative carefully, and the legal representative should be made aware of the responsibilities and liabilities that come with the position.
Responsibilities of Legal Representative
Under Chinese law, every company must have a legal representative when starting a company or opening a new business in the PRC. The PRC Company Law clearly define the responsibilities of a legal representative, that is, a legal representative is authorized to perform all acts regarding the general administration of a company according to the company’s aims and objectives. This may include:
(1) Acting (legally) to conserve the company’s assets;
(2) Executing powers of attorney on the company’s behalf;
(3) Authorizing legal representation of and litigation by the company;
(4) And executing any legal transactions that are within the nature and scope of that company’s business.
Chop of Legal Representative
In China, every company is required to have several “chops” for different purposes. Control of the chop is important in order to minimize risks. The legal representative’s chop is required on numerous company documents and is regarded as a signature. In this sense, the legal representative plays a very important role in the company’s daily operations. Consequently, any person in possession of the legal representative’s chop may exercise their power to bind the company. In order to prevent unauthorized use, companies should restrict access to the legal representative’s chop by keeping records of who used the chop, at what time, and for what purpose.
Contact Us
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020,Dongmen Rd South, Luohu , Shenzhen, China.
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