China Company Verification and Due Diligence: Legal Representative
If you contract with a Chinese company, you’d better have its legal representative sign the contract. This is because he/she holds the core power of the company and will also be responsible for the company.
Therefore, you’d better find the legal representative of the Chinese company.
1. What is the Company’s Legal Representative?
The legal representative of a Chinese company is the primary person in charge of the company, who is responsible for the external exercise of rights and performance of obligations on behalf of the company.
Normally, if you are the legal representative of the company, you may act in the name of the company without the company’s authorization, such as signing contracts.
However, if you are not its legal representative, you need a power of attorney from the company in order to act on behalf of the company within the scope of the authorization.
Normally, the legal representative of a company is its chairman or general manager, and the name of the legal representative should be registered with the company registration authorities and made public.
2. Why does the Legal Representative matter?
(1) Hold the core power of the company
In a way, if you are the legal representative of a Chinese company, you will have the core power of the company.
This is because the company shall bear the legal consequences arising from the activities performed by the legal representative in the name of the company.
Therefore, if you are going to negotiate or sign a contract with a Chinese company, you’d better conduct such work with the company’s legal representative or persons under his/her direct supervision.
(2) Take responsibility for the company
As the adage in Spider-Man goes, “With great power comes great responsibility”. The legal representative will also be personally liable for the company.
For example, when a company enters into bankruptcy proceedings, or is forced by the court to satisfy a judgment or defaults on tax payments, the judicial and administrative authorities shall have the authority to take compulsory measures against the legal representative under certain circumstances.
In addition, besides the company, its legal representative may also be subject to criminal penalties for certain corporate crimes including refusal to satisfy a judgment, infringement of copyright, production, and sale of counterfeit and substandard products as well as tax evasion.
Therefore, when you claim rights in personam from a Chinese company, you can apply to the court to take certain measures against its legal representative, such as restriction of exit or even detention.
3. How to find the Company’s Legal Representative?
You can check the Company’s Legal Representative in China’s National Enterprise Credit Information Publicity System.
This is a website of the State Administration for Market Regulation of China, available at: http://www.gsxt.gov.cn/index.html
For how to use the website, please read ‘How Do I Know if a Chinese Company Is Legitimate and Verify It?’
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