When dealing with international clients we often get questions about the term ‘legal person’and ‘supervisor’ and other key roles. In Chinese law, for every business whether domestic or foreign it is compulsory to appoint a legal representative or say legal person.
The Company Law of the PRC has set forth their qualifications and obligations in a separate sector. Elite Stage hereby summarizes the provisions as follows for your easy reference.
Q1. About the registered capital, is it required to be paid-up?
At present, China implements a registered capital subscription system, which can be any amount, but it must be consistent with the size of the company.
If the registered capital is too high, it may cause a serious investigation by the relevant departments. However, if the registered capital is too low, it cannot be approved by the approval department. Even if it is passed, there will be many problems in the bank account opening and business operation in the future, so proper registered capital is important.
Q2. What is a legal representative in China? And Who can act as the legal representative?
According to the Civil Code of the PRC, the legal representative of a legal person refers to the person in charge who conducts civil activities on behalf of the legal person in accordance with the provisions of laws or the bylaws of the legal person.
The scope of the legal representative with regards to power and liability often differs from other jurisdictions.
The legal representative is the person with the legal power to represent the company and enter into binding obligations on behalf of the company in accordance with the law and/or the company’s articles of association. It can be the chairman of the board of directors, the executive director (if there is no board of directors), or the general manager. There are no restrictions on nationality or residency.
But for example, people being pursued for a crime, convicted for bribery or corruption within the last 5 years or former directors/managers of a less than 3 years ago liquidated or declared bankrupt company are excluded.
Q3. What’s a supervisor and Who can act as the supervisor?
In China, the supervisor is a necessary prescribed supervisory for a company, and cannot be a director or manager at the same time.
The supervisor can be a foreigner or a Chinese, and doesn’t need to be engaged in any actual official position, because the supervisor is normally nominal.
The supervisor should be independent from the daily operations of the company. You can imagine the supervisor is like an auditor who may examine the books and records of the China company to ensure full compliance of (both external and internal) rules and regulations.
Q4. What’s a financial person and Who can act as the financial person?
Financial person is a vital role to a company. Chinese tax bureau requests companies to register financial person in its tax filing system.
The credit records of a company are linked to the credit records of the person in this position. Such records have a critical impact on business credibility and business operation in terms of financing, tax credit, and other related activities.
Q5. If the supervisor and financial person are foreigners, do they have to be in China?
No, all they need are the copies of their passports. And the legal person, the supervisor and the financial person can not be the same person.
Q6. What kind of activities are prohibited for the director, supervisor and senior management personnel of the company?
According to the Company Law of the PRC, no director, supervisor or senior management personnel may commit any of the following acts:
Misappropriating the company’s fund;
Depositing the company’s fund into an account under his/her own name or any other individual’s name;
Without consent of the shareholders’ meeting, shareholders’ assembly, or the board of directors, loaning the company’s fund to others or providing any guaranty to any other person by using the company’s property as in violation of the bylaw;
- Entering a contract or trading with this company by violating the bylaw or without consent of the shareholders’ meeting or shareholders’ assembly;
The income of any director supervisor or senior management personnel from any act in violation of the preceding paragraph shall belong to the company.
Q7. Can I use the address of my apartment in China to register my company?
The registered address of the company must be Land/Address used for commercial purposes or for both commercial and residential purposes.
As a WOFE in China, your actual office will be checked by different governmental departments and the bank to see if it fits their requirement as a company office.
If you have any other questions
please feel free to contact our consultants