Guide you preparing the requirements and documents for a China WFOE legal representative as well as the executive director when you decide a provide WFOE in China.

Legal representative, known as the executive director of a Chinese business, you have to decide who will be the legal representative set up in a WFOE structure and what requirements and documents the legal representative has to prepare.

Who can be the legal representative

A people, 16 years old at least, can be appointed as the legal representative under a private company and the position appointed by shareholder(s). One company just can appoint 1 people as the legal representative (executive director) according to laws and regulations of Chinese companies.

There are no nationality restrictions on the legal person who set up the WFOE company in China, but the legal representative has to been appointed by the company’s shareholder(s) after signing the appointment letter. Here, SMEsChina suggests you reading another guidance <requirements and qualifications of a Chinese legal representative> for your studies.

According to the Chinese company laws and relevant implemented regulations and rules, one of the shareholders may also be elected as the legal representative of the Chinese WFOE company.

Brief list of required documents of a legal representative

Nationality of the legal representativeDocuments have to prepare
Chinese nationalityPhoto, and original ID card need to submit local registry authority
Foreign nationalityPhoto, and appointment letter signed by shareholder(s), and passport documents certified by the Chinese embassy, or original passport (entry record within 6 months) verified by local registry authority

How to change the legal representative of an existed WFOE

Due to the departure of the legal representative, Chinese WFOE’s shareholder(s) may elect or appoint another person as the new legal representative of the company by signing new appointment letter and submit to local registry authority to get the approval, meanwhile, corporate shareholder(s) have to sign a document for removal of the old legal representative. After getting the new approved business license, the WFOE company has to submit the changing application to local bank.

What are the legal liabilities of the legal representative of a WFOE company

1.The legal representative of the WFOE shall bear civil liability to the company for any damage to the company’s interests caused by his/her intention or fault, typical for: the company’s legal representative due to serious dereliction of duty or collusion with the other party of the contract to sign and perform the contract, damage the company’s liability for compensation.

2.Since the legal representative belongs to and usually has the status of a shareholder, the legal representative of the company, as a shareholder, promoter or senior manager, shall bear legal liabilities to the company or any other third party if he/she violates the law. Common situations are as follows:

(1) if the legal representative of the company, as a shareholder or initiator, fails to fulfill the obligation to pay the capital contribution in full amount on schedule, he shall, in addition to paying the full amount to the company, bear the liability for breach of contract to the shareholders who have paid the capital contribution in full amount on schedule or in accordance with the agreement of the initiators.

(2) if the legal representative of the company ACTS as a shareholder and abuses the rights of shareholders to damage the interests of the company and other shareholders, he shall be liable for compensation.

(3) where the legal representative of the company ACTS as a shareholder and abuses the independent status of the company legal person and the limited liability of shareholders to the detriment of the interests of the company’s creditors, the company shall be jointly and severally liable for the debts of the company.

(4) if the legal representative of the company ACTS as a shareholder and damages the interests of the company by means of his association with other units, and the company is damaged, he shall be liable to the company for compensation.

(5) if the legal representative of a one-person limited liability company is a shareholder and cannot prove that the company’s property is independent of the shareholder’s own property, he shall be jointly and severally liable for the company’s debts.

(6) the legal representative of the company. If the legal representative is a senior manager of the company and falls into any of the following circumstances, his/her income shall belong to the company.

(6.1). Misappropriate company funds;
(6.2). Open an account to store the company’s funds in his/her own name or other personal names;
(6.3). In violation of the articles of association of the company, lend the company’s capital to others or provide security for others with the company’s property without the consent of the shareholders’ meeting, shareholders’ meeting or the board of directors;
(6.4). Enter into a contract or conduct a transaction with the company in violation of the articles of association of the company or without the consent of the board of shareholders or the general meeting of shareholders;
(6.5). Without the consent of the board of shareholders or the general meeting of shareholders, seek business opportunities belonging to the company for himself or others by taking advantage of his or her position, or operate business of the same kind as the company he or she works for;
(6.6). Accept commissions from others and the company as his own;
(6.7). Disclose company secrets without authorization.

Administrative and criminal responsibility:

The administrative responsibility mentioned here refers to the legal responsibility to be borne by the administrative organ for punishment in violation of relevant laws and regulations.

Administrative and criminal responsibilities mainly include the following:
Circumstances where administrative and criminal responsibilities intersect:
In any of the following circumstances, in addition to the liability of the company, the legal representative of the company may be subject to administrative sanctions (usually state-owned enterprises) and fines, and shall be investigated for criminal responsibility according to law if the case constitutes a crime:

(1) where a company engages in specific business activities beyond the business scope approved and registered by the registration authority and operates illegally;
(2) where the company conceals the true situation from the registration authority or tax authority, or practices fraud;
(3) where a shareholder or company withdraws funds or conceals property to evade debts;
(4) disposing of property without authorization after the company is dissolved, dissolved or declared bankrupt;
(5) the company fails to timely apply for the registration and announcement of the change when the company changes or terminates, causing the interested party to suffer heavy losses;
(6) engaging in other activities prohibited by law to the detriment of the interests of the state or the public interest.

Ready to Start and Launch a Business in China? So Are We.

SMEsChina teams focus on the growth of enterprise and providing a variety of business solutions in the area of strategy consultancy, WFOE setting up services, business registration, company formation, incorporation of domestic invested enterprise, finance and audit services, HR and payroll, corporate bank account, resident permit, immigration and visa, trademarks and legal compliance.

China is attracting more and more foreign companies, SMEs,entrepreneurs, startups, brands to invest and establish their business entities through reforming various laws and regulations actively. More than 47 million companies and small medium enterprises have registered their business entities in mainland China and over 3.5 million new enterprises are incorporated during each financial year with comfortable process of registering companies. Here SMEsChina is sharing our knowledge and business insights to global enterprises and companies for better learning the regulations and rules of China corporations running and corporate maintaining. All reference and guidance collected by SMEsChina Teams in accordance with the latest implemented laws of the People’s Republic of China on Wholly Foreign-Owned Enterprises ( WFOE ), Joint Venture ( JV ) and Limited Liability Company ( LLC ), Limited Liability Partnership ( LLP ), and other relevant and officially promulgated regulations and rules on the corporation formation and registration of industrial and commercial enterprises and related IP laws, immigration and resident policies ( VISA ), tax laws.

SMEsChina teams happy to work around you and look after your daily China operations confidently and smoothly. Check if setting up a private company is right for you, if you have everything to set up a business in Mainland China, you can get in touch with our teams to get more useful information and online guidance.

Recent Insights and Publications

The Most Popular Tags of Corporate Type

Other Topics and Categories