In China, company chops are mandatory for doing business, và replace signatures as used in Western countries. China Briefing explains the different types of company chops in Trung Quốc và the need for svào internal controls khổng lồ ensure they vì chưng not get misused.

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What are company chops?

In China, company chops – sometimes referred to as a seal or stamp – are mandatory for doing business và replace signatures that are used in Western countries. A company seal is the tangible representative sầu and legal evidence of the company’s activities abroad.

The company’s person-in-charge or other management personnel authorized khổng lồ hold the seal is only the temporary custodian of the seal. As such, the rights & obligations arising should be borne by the company, not the holder or custodian.

Foreign-invested enterprises (FIEs) must produce the company chop after registering with the Administration for Market Regulations (AMR). The company chop contains the full registered name of the company in Chinese and must be filed at the Public Security Bureau (PSB).

The 5 main types of company chops in China

Beyond the official company chop, a firm will likely need several chops – each for a different purpose and used on different types of official documentation – depending on its business scope. Regardless, every business should consider diversifying their use of chops.

There are five main types of company seals, và some others that can be applied in special situations.

For some chops, any person could be deemed as authorized to use it if it is in their possession. However, this will not be the case for every type of chop, as explained below, and warrants the need for clear internal controls to supervise their responsible use.

Official company chop

An official company chop is required when any important document is signed và can provide legal authority when opening a bank trương mục or altering the name or business scope of the company.

The official company chop has the widest scope of use among mỏi all the seals & is a symbol of the rights of the legal persons.

All letters, official documents, contracts, and introduction letters issued in the name of the company, certificates, or other company materials can use the official chop, which will legally bind the company. However, under some circumstances, certain documents will be required khổng lồ be stamped with a particular chop. For example, invoices which must be stamped with a special invoice chop.

Financial chop

The financial chop is used for opening a bank account, issuing checks, authenticating financial documents, such as tax filings & compliance documents, và for most bank related transactions.

It is a mandatory chop, though the company chop can often be used in its place. This is why companies will often keep their financial và company chops separate to avoid exposure to lớn misuse.

The chop must be recorded with the PSB và the company’s bank.

Legal representative’s personal chop

The legal representative’s personal chop is a chop owned by the company’s legal representative. The legal representative is the main principal of the company identified on the business license và has the authority khổng lồ enter inkhổng lồ binding obligations on behalf of the company. A company can only have one legal representative sầu.

The legal representative’s personal chop can be used in place of a signature, or alongside one. Upon registration, it must be recorded with the PSB, và the company’s bank.

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Contract chop

Many companies use a separate contract chop for signing contracts with their employees or executing agreements between salespeople và clients.

While having a contract chop is not a statutory requirement, this chop can serve sầu in place of the company chop when used for contracts.

The contract chop grants less authority than the company chop, making it useful for delegating authority.

Invoice (fapiao) chop

The invoice chop is mandatory for issuing official invoices & tax receipts (fapiao). A chopped invoice is required to lớn declare a purchase as a business expense.

Electronic chop

An electronic chop is the digital equivalent of a given chop used for online transactions, including financial & contractual ones.

Since the release of the Electronic Signature Law of the PRC , which was last revised in 2019, electronic signatures, including electronic chops, have sầu enjoyed the same legal status as physical seals.

However, khổng lồ be regarded a ‘reliable’ electronic signature, và to lớn carry legal weight, it must have the following characteristics:

The electronic chop creation data must be exclusively owned & controlled by the signatory at the time of signing;Subsequent alterations lớn the electronic chop & any relevant data made must be detectable; andSignatory must properly keep and retain all electronic chop creation data.

Parties can generally agree upon the use or non-use of electronic signatures in contracts, or other documents và instruments in civil activities. Some exceptions exist, such as the signing of documents relating to marriage, adoption, inheritance, public utilities, & other documents as stipulated by law & administrative regulations.

Customs chop

The customs chop is used for customs declarations on import & export goods. It is mandatory for companies engaged in cross-border trade.

Other types of chops

Although only the company, financial, and customs chops (if applicable) are legally required, though various government departments may at times require other chops for specific purposes.

For example, a government department may require a document chopped with the company seal of the foreign investor’s parent company. This can create complexities, as the use of seals by many smaller corporations is not mandatory và is not part of the typical administration process.

However, in order khổng lồ satisfy requirements, a seal may be procured, which should be countersigned by a recognized person on the board of the parent company. Chinese authorities will normally specify whose signature should accompany the document & seal.

In-house counsel for US or EU corporations should determine the legal use of chops and seals within their own domestic legal framework. The Chinese, in requesting seals và chopped documents, are merely imposing their own domestic administration rules to foreign companies without necessarily appreciating that foreign investors are not governed abroad by the same regulatory framework.

Secure your company chops

Recently, a spate of business disputes have surfaced in Trung Quốc, concerning the misappropriation, misuse or forgery of company chops— placing the spotlight on a long-held and powerful system that has very much been ingrained in China’s business culture.

In July 2020, Tencent Holdings Ltd was embroiled in a legal dispute with Lao Gan Ma, the famous Chinese chili oil maker, who was found to have sầu reneged on a lucrative advertising contract with the mạng internet giant.