Change of legal representative

Every enterprise established in China, whether domestic or foreign, must have a legal representative. The main person in charge is an employee who has the legal authority to execute the company and assume binding obligations on behalf of the company according to the law or the company’s articles of association. Essentially, a legal representative is a person appointed to act on behalf of the company, defined as “the person responsible for the performance of duties and powers on behalf of the company”.

Duty and power of a legal representative in China

The role of the company’s legal representative in China is very important, and choosing the right person is crucial to the company’s stability and success in the Chinese market.

The duties of the legal representative include protecting company assets; having power of attorney on behalf of the company; signing contracts and agreements; filing reports with Chinese regulators and representing legal proceedings.

Chinese law does not clearly stipulate the power of the legal representative, but in order to exercise this power, the legal representative holds his own “seal” (official seal) as an official signature. It gives the person in that position virtually unlimited power over the execution of the company’s business.

In fact, the legal representative can arbitrarily decide when and how to use the seal, and thus has a significant impact on the normal operation of the company and ultimately its fate.

How to choose the legal representative of the company in China?

Due to the huge power of the position, when registering a company in China, the choice of the legal representative is an important task that must be carefully considered and valued. It is worth knowing that the Chinese company law does not require that the legal representative must be Chinese or residing in China, so there are various options.

The natural choice for foreign investors when appointing a legal representative is to choose an existing employee, usually from the parent company, who is familiar with the company culture, shares its values, and can be trusted.

However, such employees may be inexperienced and unfamiliar with the Chinese market and may face many cultural, language, and other barriers. In addition, the legal representative usually has to travel to China for some cooperation applications, such as opening a bank account, tax, or legal proceedings.

Another option is to appoint a Chinese employee. In this case, employees are involved in the local market but lack sufficient understanding of corporate culture and company policies.

Therefore, when using a Wholly Foreign Owned Enterprise (WFOE) or Joint Venture (JV), a foreign company should carefully consider who is best suited to serve as its legal representative.

Change the legal representative

In practice, it is not uncommon for a company to change its legal representative. It can be initiated for various reasons; the most common reason is the termination of the employment contract of the legal representative. In this case, both the company and its legal representative must recognize the importance and possible risks of the Chinese regulatory change process.

According to the provisions of Article 13 of the Company Law, the directors of the board of directors, executive directors or managers shall act as the legal representative of the company in accordance with the provisions of the company’s articles of association and shall be registered in accordance with the law. An enterprise that replaces its legal representative shall re-register with the departments at all levels.

Article 30 of the “Regulations of the People’s Republic of China on the Administration of Company Registration” stipulates that when a company changes its legal representative, it shall file an application for change registration within 30 days from the date of the company’s change of registration. The decision to change the legal representative. The decision to replace the legal representative may be made through the resolution of the shareholders’ general meeting or the unanimous written consent signed or sealed by the shareholders.

If the legal representative of the company changes, various departments such as industry and commerce, taxation, seal engraving, banking, foreign exchange, and customs will be required to make changes. The change process corresponds to different units, and the unit may also request to renew all the information of the new company according to the situation ( such as licenses).