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China Company
Company Of Legal Representative
Every enterprise established in China, whether it is domestic or foreign-funded, must have a legal representative. He / She is the principal person in charge of the company, an employee who is empowered to execute the company's legal rights and obligations in accordance with the law or the company's articles of association and represents the company in assuming binding obligations.
Essentially, the legal representative is a person appointed to act on behalf of the company. Article 38 of the General Principles of the Civil Law of the People's Republic of China defines the legal representative as "the person responsible for performing the duties and exercising the powers of the company on behalf of the company".
I.The duties and powers of China's legal representative.
- The role of the legal representative of a company in China is crucial, and choosing the right candidate is essential for the stability and success of the company in the Chinese market.
- In some cases, the legal representative will leave their mark on anything that reflects the company’s goals. Therefore, the responsibilities of the legal representative include protecting company assets; representing the company with authorization documents; signing contracts and agreements; submitting reports to Chinese regulatory agencies, and acting as the legal representative in legal proceedings.
- Chinese law does not have a clear definition of the power of the legal representative, but to exercise this power, the legal representative holds their own “seal” (official stamp) as a formal signature. It grants the person serving in the position almost unlimited power to conduct company business. In fact, the legal representative can decide when and how to use the seal at their discretion, thereby having a significant impact on the normal operation and ultimate fate of the company.
- The role of the legal representative of a company in China is crucial, and choosing the right candidate is essential for the stability and success of the company in the Chinese market.
- In some cases, the legal representative will leave their mark on anything that reflects the company’s goals. Therefore, the responsibilities of the legal representative include protecting company assets; representing the company with authorization documents; signing contracts and agreements; submitting reports to Chinese regulatory agencies, and acting as the legal representative in legal proceedings.
- Chinese law does not have a clear definition of the power of the legal representative, but to exercise this power, the legal representative holds their own “seal” (official stamp) as a formal signature. It grants the person serving in the position almost unlimited power to conduct company business. In fact, the legal representative can decide when and how to use the seal at their discretion, thereby having a significant impact on the normal operation and ultimate fate of the company.
II.How to choose a legal representative for a company in China?
- Given the enormous power of the position, the selection of a legal representative when registering a company in China is an important task that requires careful consideration and attention. It is worth noting that Chinese company law does not require the legal representative to be Chinese or to reside in China, so there are multiple options available.
- Foreign investors’ natural choice when appointing a legal representative is to select an existing employee, typically from the parent company, who is familiar with the company culture, shares its values, and can be trusted. However, such employees may lack experience and familiarity with the Chinese market, and may face many cultural, linguistic, and other barriers. Additionally, legal representatives typically must travel to China to facilitate certain applications, such as opening bank accounts, tax matters, or legal proceedings.
- Another option is to appoint a Chinese employee. In this case, the employee may have more experience in the local market, but may lack sufficient understanding of the corporate culture and company policies.
- Therefore, when using a Wholly Foreign-Owned Enterprise (WFOE) or Joint Venture (JV), foreign companies should carefully consider who is best suited to serve as their legal representative.
III.What are the steps to change the legal representative in China?
- 1.Hold a Shareholders Meeting: The company’s shareholders must hold a meeting and vote according to the provisions in the company’s articles of association to determine whether to change the legal representative. If the vote is passed, the next step can be taken.
- 2.Amend the company’s registration information: Submit a change application to the market supervision department (or economic management organization) in the place where the company is located, and provide relevant documents, such as:
- Application for Change of Company Registration.
- Identification documents of the current and new legal representatives.
- Copy of the company's articles of association and other relevant documents.
- Proof of the shareholder (or general shareholder meeting) resolution, etc.
- 3.Announce the change of information: Publish the change registration information in designated newspapers for a period of 30 days. If there is no objection, the process can proceed to the next step.
- 4.Obtain new business license: After approval by the relevant department, the new business license can be obtained and the new legal representative’s name can be used.
- 5.After the registration is completed by the enterprise registration authority, some change procedures need to be handled in relevant departments, such as bank account changes, tax registration changes, etc.
IV.Conclusion
- In practice, it is not uncommon for a company to change its legal representative. It can be initiated for various reasons, with the most common being the termination of the legal representative’s employment contract. In such cases, the company and its legal representative must both recognize the importance of China’s regulatory change process and the potential risks involved.
- According to Article 13 of the China Company Law, the director(s) of the board, executive director(s), or manager(s) shall serve as the legal representative(s) of the company in accordance with the provisions of the company’s articles of association and shall handle registration procedures in accordance with the law. Enterprises that change their legal representative(s) shall re-register with relevant departments at all levels.
- According to Article 30 of the Regulations on the Administration of Registration of Enterprises, when a company changes its legal representative, it shall apply for registration of the change within 30 days from the date of registration of the change, and provide the decision or resolution on the change of the legal representative. The decision to change the legal representative may be made by resolution of the shareholders’ meeting or by unanimous written consent of the shareholders’ signatures or seals.
- If there is a change in the legal representative of a company, it is necessary to update various departments such as industry and commerce, taxation, seal carving, banking, foreign exchange, customs, etc. during the change process. Depending on the situation, each department may also require the company to update all relevant information (such as license and permit qualifications) with them.
- Inter Area provide legal representative change application services and document preparation for China (Shanghai, Shenzhen, Suzhou, Xiamen, etc.) and Vietnam (Hanoi, Ho Chi Minh City).