Legal Liabilities of China WFOE’s Legal Representative – Business China
On your way to form a Wholly Foreign Owned Enterprise(WFOE) in China, you will be requested to name one legal representative to be listed on the business license. We will elaborate the legal concept, the appointed requirement and the legal liabilities of the legal representative in China company registration.
The Legal Concept of Legal Representative
According to the Provisions of the General Provisions of the Civil Law of PRC, in accordance with the provisions of the Articles of Association of the law, the legal representative is the person who represents the company to take in charge of the exercise of the establishment's functions (article 38).
The legal representative system is a kind of legal representative system which is derived from the traditional leadership system of China's state-owned enterprises. China adopts and implements a single legal representative system.
Generally, the legal representative and the enterprise do not need to sign labor contract, they have no labor contract relationship and is not subject to labor law and labor contract law adjustment.
Who can be Appointed as the Legal Representative?
The legal representative of the company shall be the chairman, executive director or manager in accordance with the provisions of the Articles of Association of the company and shall be registered according to law (company law, 2005, article 13)
Rights and Duties of Legal Representative
The civil liability of the legal representative stipulated in the general provisions of the civil law
- To bear civil liability for business fault;
- The legal representative shall be responsible for the civil tort liability which may be borne by the property of the unit or entity;
- Civil sanctions imposed for illegal ACTS - fines, detention;
Legal liabilities of the legal representative as the senior management of the company
The directors and senior managers shall not have the following ACTS:
- Misappropriating company funds;
- To open an account in the name of the company or in the name of another individual;
- In violation of the provisions of the articles of association of the company, without the consent of the shareholders' meeting, the general meeting of shareholders or the board of directors, the company's funds may be lent to others or provided with the company's property to guarantee others;
- To enter into a contract or trade with the company in violation of the provisions of the company's articles of association or without the consent of the shareholders' meeting or the general meeting of shareholders;
- Without the consent of the shareholder meeting, use the position for themselves or others seek belong to the company's business opportunities, proprietary or for others and for the same kind of business;
- Accept other people's commissions for dealing with the company as their own;
- Disclose company secrets without authorization;
- Other ACTS that violate the duty of loyalty to the company.
