The legal representative of the Chinese company, whose name is on its business license, can sign the contract on behalf of the company.

This post was first published in CJO GLOBAL, which is committed to providing consulting services in China-related cross-border trade risk management and debt collection.

In China, in order for a company to formally indicate its intent to accept a contract, it shall do so by the following means:

(1) it shall affix the official company seal on the contract; and

(2) its legal representative had better sign the contract as well.

If you enter into a contract with a Chinese company which you wish to come into effect under Chinese laws, you had better require the company to adopt the above means.

But, the signature of the legal representative is not necessarily required, but the company seal is.

1. The signature of the legal representative validates the contract

In China, companies are required to designate a person who can represent the company in their registration information. During the period when the said person is registered as the legal representative of the company, the person may act on behalf of the company in any way in relation to his/her position.

Therefore, the contract signed by the legal representative on behalf of the company is also valid.

In theory, either the official company seal or the signature of the legal representative can make the contract valid. However, we do not know if someone will impersonate the legal representative to sign.

2. Stamping with the seal is the most common way for Chinese companies to conclude a contract.

In China, the official company seal is a symbol of corporate power. Anything stamped with the official company seal is considered to be on behalf of the company’s will.

The person who has the right to use the official company seal is the actual controller of the company. If the person who negotiates with you on behalf of a Chinese company can’t get the controller of the company to stamp the contract with the official company seal, then he/she is highly unlikely to represent the company.

So, if you’re going to do business with a Chinese company, the contract has to be stamped with the official company seal. In this way, the Chinese court and law enforcement authorities will recognize that the contract is concluded by the said company.

The Cross-border Trade Dispute 101 Series (‘CTD 101 Series’) provides an introduction to China-related cross-border trade dispute, and covers the knowledge essential to cross-border trade dispute resolution and debt collection.

Photo by KJ Brix on Unsplash

Contributors: Meng Yu 余萌

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