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Chinese company stamp vs signature.

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Chinese company stamp vs signature

Legal procedures in China have notable differences. For instance, employees in a Chinese company can sign official documents using the company chop. This practice arises from China’s use of a stamp for document authentication.

When registering a WFOE, companies are provided with a Chinese company stamp, which includes specific functions like the legal representative stamp, financial stamp and contract stamp. While signatures are still valid, the stamp typically carries legal weight when making a document legally binding.

Key takeaways

  • A signature is associated with a particular person, while anyone in the company can operate the stamp.
  • The legal representative must control stamp usage and ensure it is used for its intended purposes.
  • Correctly using a Chinese company stamp involves chopping in red ink in a circular shape and ensuring the chop’s name matches the Chinese company name.
  • Despite costs, local entrepreneurs prioritise stamp validation to prevent potential fraudulent activities.

Chinese stamp (chop) vs signature

Certain characteristics distinguish the Chinese stamp or chop from a signature. These differences impact how a legal representative should handle the stamp. While a signature is personally linked to an individual, a stamp is operated by a person, giving the operator authority.

This detail is often overlooked by WFOE and joint venture owners who may leave the Chinese company stamp with an employee. When a CEO needs to be abroad for most of the year, it is convenient that documents can be stamped by an employee who is locally present. However, this comes with compliance risk, especially if the employee is not accountable for the WFOE.

Company stamp management and compliance tips

Keeping the company stamp secure is essential to protect the company’s integrity and prevent potential fraud or misuse. Unlike a signature, which is unique to an individual, the company represents the entire organisation and carries significant legal weight. Therefore, the decision of who has access to the stamp and the authority to use it exclusively lies with the company’s legal representative.

Establishing clear guidelines and protocols for stamp usage is important. These include maintaining a secure storage location for the stamp, limiting access to authorised personnel only, and implementing regular audits and checks to ensure compliance with stamp usage policies. Additionally, providing training and awareness programs to employees about the importance of stamp security and the potential consequences of unauthorised use can further strengthen the company’s control over its stamp and protection against potential risks.

This may not be surprising for new WFOE owners, but it is a detail often overlooked when starting a business in China.

Another important compliance issue involves the opposite signing party. Sometimes, organisations with malicious intent use fake stamps on contracts, leading to potential legal disputes and financial losses. To avoid this risk, companies should ensure their company stamp is chopped in red ink and has a circular shape, as per the standard requirements. An illegible chop may not only raise doubts about the authenticity of the document but also make it legally invalid.

Furthermore, the chop’s name should match the Chinese name of the company, not the English one. If a blue, English and/or rectangular stamp is seen on an agreement instead of the required red, circular Chinese company stamp, it could raise concerns about authenticity and compliance with legal standards.

Chinese company stamp validation

Validating a Chinese company stamp is a common yet costly process for local entrepreneurs, involving visits to the registered local authorities. This ensures the stamp’s registration with the company. While some stamps are unregistered but still legal, in such cases, when comparing the stamp with other signed deals by the counterpart is necessary.

Western firms believe this to be an expensive waste of time. However, Chinese entrepreneurs argue that the potential costs of being cheated outweigh the time and expenses of stamp validation.

Conclusion

Navigating the difference between a signature and a company stamp is critical for foreign businesses operating in China. The stamp carries significant legal weight and demands strict management to prevent misuse. Rigorous procedures like secure storage, limited access, and red ink circular chops are essential for safeguarding the company’s integrity and avoiding legal or financial risks. While Western firms might find stamp validation a cumbersome expense, Chinese businesses consider it necessary to protect against potential fraud.


Contact our teams for expert support and further information about corporate governance in China to ensure you are compliant in the market.

Maxime Van ‘t Klooster, Partner, m.vantklooster@acclime.com
Bram Voeten, Regional Business Development Manager, b.voeten@acclime.com
Christophe Marquis, Director, Shanghai, c.marquis@acclime.com


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