Overview About Legal Representatives in China
All businesses that have been started in China, both domestic and foreign, must have their legal representative. They are the company’s main principal and can legally represent the company – and take part in binding obligations. The legal representative can enter on behalf of the company, to comply with the law or the company’s articles of association. Most importantly, the person must be someone who can act on behalf of the company.
If you are going to set up a business in China, you must know all about having a legal representative.
Based on China’s Company Law, someone from the senior management, which could be the deputy general manager, general manager, finance head, or other individuals who are part of the company is liable. The person needs to compensate for any damage caused by the company. The legal representative could be the company board’s president or general manager. The legal representative misconduct also applies to them.
It is about violating Chinese laws and regulations. When this happens, the company and legal representative face punishments. These examples are the following:
- The faults that involve vicarious liability. Legal representatives might be fined up to RMB 2,000 and can be detained up to 15 days.
- Giving false disclosure: The fines could range from RMB 30,000.
- Faults that are linked to liquidation procedures: In case, the penalties that are imposed on legal representatives in China that vary between RMB 10,000 and RMB 100,000.
- Responsibilities that are related to liquidation procedures: In this case, the fines charged on legal representatives are between RMB 10,000 to RMB 100,000.
The representative may defend himself by giving proof that he did not know about the faults committed and is not accountable.
The PRC Criminal Law holds the entity and the persons who are liable for the entity’s crime. In this case, the legal representative as the primary entity’s principal will not be charged with criminal liability unless they participate in the crime and is responsible for the crime.
That means, even if the entity commits a crime, the legal representative does not take part in the crime’s body, he/she will not be held liable. However, in case the legal representative of an entity commits non-duty crimes, he/she will be personally subject to liability.
Powers and Responsibilities of Legal Representatives
The PRC Company Law is not talking about the skills of a legal representative, but he/she must perform acts based on the company’s general administration. It is based on their aims and objectives. It could include the following:
- Legally acting to conserve the company assets
- Power of attorney provided on behalf of the business
- Authorizing to represent the litigation done by the company professionally
- Executing legal transactions within the scope and nature of the company business
You must consider this if you want to set up a business in China.