As Chinese lawyers, we have received many queries from foreign investors about the legal representative in China. We therefore have prepared the series of articles in that regard based on our experience as Chinese lawyers. If you would like to know more details, please click the link of the corresponding article. We would like to summary these series of articles briefly as follows.
I. Legal Representative in China: Basic Concepts
In this article, we have introduced some basic concepts of legal representative. In China, a legal representative refers to a natural person who is in charge of the company and can act on behalf of the company as per the provisions of law or the articles of association. As per Article 13 of the Company Law of the People’s Republic of China, the legal representative of the company shall be assumed by the chairman of the board of directors, executive director or manager according to the company’s articles of association and shall be registered according to law.
II. Legal Representative in China: Legal Status
In this article, we have illustrated the legal status of legal representative in China. It is not compulsory for a legal representative to sign a labor contract with the company. However, if the legal representative is also entitled to salaries from the company, a labor relationship is established between the legal representative and the company. Therefore, a labor contract shall be concluded in this occasion. The legal representative can sign the contact on behalf of the company and such contract is usually valid even without the official company chop.
III. Legal Representative in China: Qualification
In this article, we have further elaborated on the qualification of the legal representative. The legal representative shall have full civil capacity, which means he/she should be no less than 18 years old and is mentally and intellectually capable. But there is no such requirement for the degree or years of experience. There is no such provision concerning the nationality of the legal representative. A non-Chinese citizen can serve as the legal representative of a domestic-funded company in China. The legal representative in China can be a shareholder or someone other than shareholders. Article 12 of the Regulation of the People’s Republic of China on the Administration of the Registration of Market Entities specified the prohibited conditions for the legal representative of a company to serve.
IV. Legal Representative in China: Management and Restraints
In this article, we have shared our ideas about the management of and restraints on the legal representative in China. A person can serve as the legal representative of two or more companies at the same time in China. Please however be noted that the legal representative is the chairman of the board of directors, the executive director or the manager of the company, and the directors and the manager of a company shall abide by the relevant provisions for qualifications and obligations in the Company Law of the People’s Republic of China and the company’s articles of association. A company can impose constraints on the behavior of the legal representative by articles of association, the board of directors or the shareholders’ meeting.
V. Legal Representative in China: Civil Liabilities
In this article, we have introduced the potential civil liabilities a legal representative may assume. The company shall bear the civil liability for damage to the others caused by the legal representative while performing his duties as a rule. However, if such damage is caused by the legal representative’s fault, the company may be indemnified by the legal representative against such civil liability. Since the legal representative is the chairman of the board of directors, executive director or manager of the company, if the legal representative violates the provisions of relevant laws and regulations or the company’s articles of association while performing his duties and thereby causes losses to the company, the legal representative shall be liable for compensating the company for such losses. Likewise, if the legal representative causes damage to the shareholders’ interests in violation of relevant provisions, the legal representative shall compensate the shareholders concerned therefor.
VI. Legal Representative in China: Administrative Liabilities
In this article, we have explained the potential administrative liabilities a legal representative may assume. Since the legal representative is generally deemed as the directly responsible person of the company, he may be imposed certain administrative penalties as fines and detention if the company fails to disclose the property status truthfully in accordance with the laws and regulations. If the company fails to perform its obligations in accordance with the legal document in force and the court has ordered enforcement, the legal representative may be imposed execution measures including restrictions on exit and high consumption (such as traveling by air or booking star hotels). In certain industry or fields, there will be special regulations. If the relevant legal representative fails to supervise the company’s performance of corresponding responsibilities, such legal representative may be subjected to administrative penalties.
VII. Legal Representative in China: Criminal Liabilities
In this article, we have introduced the criminal liabilities involving the legal representative in China. Criminal liabilities are the most severe among all legal consequences and are most concerned by foreign investors. It should be noted that in addition to the crime committed by the legal representative himself, the legal representative may also bear criminal liabilities for the crime committed by the company. According to the provisions of the Criminal Law of the People’s Republic of China, some common crimes that the legal representative can be charged with include the crime of major liability accident, the crime of producing and selling fake and inferior products, the crime of smuggling ordinary goods and articles, the crime of false capital contribution and withdrawal of capital contribution, the crime of hiding or destroying accounting documents, accounting books, and financial accounting reports, the crime of bribery of non-state officials, the crime of tax evasion, the crime of contract fraud, and the crime of illegal business operations, etc. The legal representative shall be investigated for criminal liabilities during his term of office if certain conditions are met concurrently. This article will provide you with more details in respect to these conditions.
VIII. Legal Representative in China: Risk Control
In this article, we have put forward some advice about reducing the relevant legal risks of serving as the legal representative in a Chinese company based on our experience as Chinese lawyers. For example, making collective decisions for important issues, purchasing senior management liability insurance and restricting authorization of legal representative.
IX. How to Change the Legal Representative in China
In this article, we have introduced some basic issues about changing the legal representative in China. According to our experience, the consent of the current legal representative is not needed in general. But in some cases, the administration of market regulation may require the current legal representative to sign the documents related to the application for change of registration. In case of refusal by the current legal representative, the company may file a lawsuit for a dispute over change of company registration. The change of registration with the administration of market regulation is compulsory. If a company would like to change the legal representative, it should submit the required document to the administration of market.
X. Legal Representative in China: Remedies for Failed Change of Registration after Resignation (I)
In this article, we have briefly analyzed a case of the Supreme People’s Court regarding the failure of change of registration. This case is about how the former legal representative changed the legal representative through litigation after the company refused to change the legal representative.
XI. Legal Representative in China: Remedies for Failed Change of Registration after Resignation (II)
In this article, we offer the following suggestions for legal representatives who have already resigned and for whom the company is reluctant to handle the procedures of change of registration with the market supervision administration from the perspective of Chinese lawyers engaged in the foreign investment field for a long time. First, request for the change of legal representative in writing. Second, notify the other party of the change of legal representative in writing. Third, file a lawsuit with the court.
As Chinese lawyers experienced in the field of foreign investment for a long time, we have assisted many foreign invested enterprises in their legal issues related to legal representatives. If you have any legal questions regarding the legal representative, please feel free to contact us via administrator@35.93.49.201.