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The Responsibilities, Qualifications and Forbidden Activities of Legal Representative

Updated:2020-4-10 10:47:01    Source:www.tannet-group.comViews:242

China Company Registration/China Business Services
Hotline: 86-13823131503 (Wechat No.) Email:susiehu@citilinkia.com

A legal Representative is a person in charge of corporate operation and management and development, responsible for all the legal affairs arising from the business running.

In China, a company must have a “chop” which will be, normally, in the custody of the legal representative. Many important corporate documents and contracts will need the company to stick its chop and the legal representative to sigh thereon. Most financial instruments even need the legal representative to stick his/her personal chop and/or his/her signature. Further more, the legal representative needs signing many application documents to the company registry authority when the company goes through establishment or alteration registration formalities with the authority. In this sense, the sample of signature of the legal representative shall be submitted to the company registry authority for record. In this sense, the legal representative plays a very important role in company’s daily operation. He or She shall exercise rights and performs duties within the permission of laws and regulations as well as the articles of association of the company, represent the company to participate in all kinds of civil activities subject to supervision of the company and relevant authorities. As main principal, the legal representative will be responsible for the company’s registration, production and operation, alteration and liquidation, as well as executing various legal documents. For instance, the legal representative of a company which is in the process of bankruptcy and liquidation shall be responsible for keeping and delivering the book accounts, records, chops, etc., presenting at the creditor rights’ meeting and answering inquiries from the creditors. While, the legal representative of a company against which a judgment is being enforced in a legal proceeding must go to the court to answer inquiry upon court’s summon.

Since the legal representative is the main principal of a company and may exert a decisive influence on the company, to act as the legal representative, s/he shall not satisfy any of the following conditions and, in practice, the company registry authority will also review those conditions:

(1) without civil capacity or with only limited civil capacity;
(2) being pursued with criminal punishment or other criminal compulsory measures;
(3) being ordered for arrest by public security bureau;
(4) having been sentenced to any criminal punishment due to an offense of corruption, bribery, encroachment, misappropriation of property or disrupting the economic order of the socialist market and five years have not elapsed since the completion of the execution of the punishment;
(5) being a former director, factory director or manager of a company or enterprise which was bankrupt and liquidated, whereby s/he was personally liable for the bankruptcy thereof, and three years have not elapsed since the completion of the bankruptcy and liquidation of the company or enterprise;
(6) being the legal representative of a company or enterprise, but the business license thereof was revoked and this company or enterprise was ordered to close due to violation of the law, whereby s/he is personally liable for the revocation, and three years have not elapsed since the revocation of the business license thereof; or
(7) having a relatively large amount of debt which is due but uncleared.

Since the legal representative holds an important position in a company and plays an important role therein, s/he can make full use of her/his position to damage the interests of the company, therefore, the Company Law prohibits the legal representative from conducting certain behaviors, otherwise, the income arising therefrom shall be owned by the company. These forbidden activities include but not limit to the followings:

(1) misappropriating the company’s fund;
(2) depositing the company’s fund into an account in his/her own name or in any other individual’s name;
(3) loaning the company’s fund to others or providing any guaranty to any other persons by using the company’s property without consent of the shareholders’ meeting, or board of directors, and in violation of the articles of association of the company;

(4) signing a contract or dealing with the company by violating the articles of association of the company or without consent of the shareholders’ meeting;
(5) seeking for business opportunities for himself/herself or any other person by taking advantages of his/her powers, or operating for himself/herself or for any other person any similar business of the company s/he works for without consent of the shareholders’ meeting;
(6) taking commissions from the transactions between others and the company into his/her own pocket;
(7) illegally disclosing the company’s trade secrets; and
(8) other acts inconsistent with the obligation of fidelity to the company.

Potential Liabilities on Legal Representative

The legal representative of a company has the power to represent the company, and his/her act will bind the company. To prevent the legal representative from abusing his/her statutory power, under certain circumstances, the legal representative may assume liabilities imposed by laws.

The liabilities of a legal representative can be divided into civil, administrative and criminal liabilities, each of which carries out different legal consequences.

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