Decoding the “Legal Representative” of A Chinese Company
- May 30, 2024
- Posted by: sinovestconsulting
- Category: Legal & Regulation
Decoding the “Legal Representative” of a Chinese Company
According to the Chinese Civil Law and the Company Law, the legal representative is someone who is appointed to perform the duties and powers on behalf of a legal person in accordance with the law or the constituent documents of the legal person，that in our discussion of this article, refers to a company, whether foreign or domestic, LLCs or joint stock companies.
Who can be the legal representative?
According to the new company law which will enter into effect on 1st July 2024, the legal representative of a company can be director or manager who execute the company affairs may serve as the legal representative of the company. The scope of the candidates for the legal representative has been extended comparing to the definition in the previous on the legal representative which can only be the chairman of the board, the executive director or the general manager.
There are no restrictions on nationality or residency. People being pursued for a crime, convicted for bribery or corruption within the last 5 years or former directors/managers of a less than 3 years ago liquidated or declared bankrupt company or being listed in the dishonest debtors by the court are excluded.
Legal representative’s powers
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:
- The legal representative of a company shall exercise its powers and fulfill its obligations within the scope of powers stipulated by laws, regulations, and the articles of association of the company, represent the enterprise as a legal person in civil activities, be fully responsible for the production, operation, and management of the company, and accept supervision from all members of the enterprise and relevant authorities.
- The legal representative of a company may entrust others to perform their duties on their behalf.
- The legal representative of a company is the signatory who exercises powers on behalf of the company. Upon the finalization of the registration, the Administration of Market Regulation will provide the company with a set of Seals in which there is a seal of the legal representative. In some circumstances, the seal of the legal representative can be considered with the equal effect with the manuscript signature of the legal representative.
- In terms of external relations, actions taken by the legal representative in the name of the company in accordance with laws, regulations, and the company’s articles of association shall be deemed as company actions and shall be borne by the company for relevant legal responsibilities. It is not an agency relationship with the legal entity, but a representative relationship, and its representative authority comes from clear authorization by law, so there is no need for a separate authorization letter from the legal entity. When a dispute arises, the legal representative has the right to directly represent the company in filing a lawsuit and responding to the people’s court. The litigation actions taken by the legal representative are the company’s litigation actions and have direct legal effect on the company.
Legal Representative’s liabilities
In the new Company Law, it is more clarified the liability of the legal representative during the performance of his duties. According to its provisions, the consequences of the actions of the legal representative shall be borne by the company in principle. At the same time, restrictions on the powers of a company’s legal representative by the company’s articles of association or shareholders’ meeting shall not be enforceable against bona fide third parties. If the legal representative causes damage to others while performing his duties, the company shall bear the civil liability. After assuming liability, the company may seek indemnification from the legal representative if he or she is at fault.
The contact of legal representative
When a foreign investor registers the company in the Chinese Administration of Market Regulation (AMR) to apply for the business license, the email and the mobile phone number will be filed in AMR. This email will receive the link from AMR to download the electronic business license which will be used in the future business license management and authorization.
Nowadays, all the mobile phone number is registered under the real name of the phone number holder. It’s better to get a Chinese mobile phone number under the name of the legal representative in the beginning of the company registration. Because this number will be filed in the tax bureau, the bank and the custom.
The legal representative of a Chinese company is a pivotal figure whose responsibilities and powers extend far beyond those typically associated with similar roles in other jurisdictions. They are also the public face of the company, who will be shown on the business license and publicly shown companies information. It’s highly recommended that the foreign investors must ensure they have a clear understanding of the legal representative’s powers and the potential risks involved.
