Interesting article. What happens if the company does something that violates Chinese laws? For example, non-payment of capital after the creation of the WFOE. Can a legal representative resign without the consent of the board of directors or will he be held liable in such cases? The role of the company`s legal representative in China is of great importance, and selecting the right person for the position is crucial for the company`s stability and success in the Chinese market. The shareholder represents the highest level of authority in the company and decides which key positions need to be filled in the company. Individuals and limited liability companies are allowed to hold shares in a Chinese company. The shareholder is usually allowed to decide on the company`s business and investment plans. the appointment of directors and superiors; review and approve the Corporation`s annual financial budget and financial statements, profit distribution plans (or loss compensation plans); and to decide on capital increases or increases, mergers, divisions or dissolutions of the company. It is important to note that PRC company law does not impose any restrictions on the nationality of legal roles, except in certain sectors such as state-owned airlines, where the legal representative must be a Chinese citizen and does not require him or her to reside in China. However, for some positions, it is necessary to provide a Chinese mobile phone number or to be present in person at certain offices or banks. Key positions include: Basic requirements and selection of a legal representative PRC company law does not impose any restrictions on the nationality of the legal representative, and the selected person could actually reside in a country; nor is he obliged to reside in China.
According to the Companies Act, the legal representative may be the Chairman of the Board of Directors, the Managing Director (if there is no Board of Directors) or the Managing Director. However, the choice of legal representative varies depending on the structure of the company. Each company established in China must appoint a legal representative. This person represents the company and is responsible for the execution of the tasks and powers on behalf of the company in accordance with the law and the articles of association. It is important to note that the legal representative has a personal seal that serves as a formal signature and their name is registered on the company`s business license. This position is the most important role and comes with responsibilities, as the individual is held responsible for all actions of the Chinese entity. These responsibilities may give rise to personal risks for acts and omissions of the legal representative or the Company and its employees, who may be held civilly, administratively or even criminally liable. The legal representative must be carefully selected, as his professional actions are also considered acts of the company. The legal representative must also hold either the position of general manager (or president if there is a board of directors) or general manager of the company. 11. August – Every company incorporated in China, whether domestic or foreign, must have a legal representative.
He is the principal officer of the company and the employee with the legal authority to represent the company in accordance with the law or the articles of association of the company and to enter into binding obligations on behalf of the company. Essentially, the legal representative is a person who is appointed to act on behalf of the company, and Article 38 of the General Principles of Civil Law of the People`s Republic of China defines the role as “the responsible person who exercises the functions and powers on behalf of a legal entity in accordance with the law or the founding documents of the legal entity.” According to the “Companies Law of the People`s Republic of China” promulgated in 1993, the chairman of the board of directors is usually the legal representative of the company, which means that he or she has great authority and power in operations both inside and outside the company. Stay ahead of the curve in emerging Asia. Our subscription service provides regular regulatory updates, including the latest legal, tax and accounting changes that impact your business. The role of the supervisor is very important for the potential responsibilities of the legal representative, as he is authorized to supervise and restrict the legal representative in order to reduce the potential risks of a dishonest legal representative acting on behalf of the company. The Chinese government is demanding that any company planning to close, both foreign and domestic, must leave. The activity of the legal representative is considered an activity of the company, which means that all civil liabilities arising from the actions of the legal representative are borne by the company. However, the Company may claim compensation from the legal representative for losses caused by it. The legal representative assumes administrative and criminal liability on behalf of the company. Therefore, it is very important that the company does not do or perform anything illegal.
In accordance with the articles of association, shareholders may replace the legal representative if the latter is deemed unfit for the exercise of his functions. However, it should be noted that a legal representative cannot resign from his or her position without a duly appointed replacement. In accordance with the relevant laws, the legal representative of a corporation must exercise his or her powers in accordance with the requirements prescribed by the statutes, by-laws and articles of the corporation. If the activity of the legal person gives rise to administrative or criminal liability, the legal representative always assumes the corresponding administrative and criminal liability, even if he does not participate in the activity. These activities and the relevant legislated responsibilities have been presented as follows. In addition, according to PRC company law, any legal representative of a company whose business license has been revoked and is ordered to close due to violations of the law will be blacklisted (you can read our article: Close your business properly – don`t run away!). He is prohibited from holding a position such as director, supervisor or senior manager of a company for three years. The Companies Law of the People`s Republic of China (revised in 2014) stipulates that all legal entities must establish a legal representative and designates the chairman of their board of directors, its director or general manager as its legal representative in accordance with the company`s articles of association.
