The role of a legal representative is a central feature of corporate governance in China and reflects the country’s evolving legal and business environment. Under the Company Law of the People’s Republic of China, each company needs to appoint a single legal representative who is authorised to act on its behalf in legal and commercial matters. Unlike in many Western jurisdictions, the role carries specific statutory authority and responsibilities defined by law, making it an important consideration for companies establishing or operating in China.
This guide outlines who can be appointed as a legal representative, the scope of their responsibilities and the key risks that businesses should be aware of.
- Companies have greater flexibility in appointing a legal representative under the Company Law of the People’s Republic of China (2024), but the role should still be held by a director involved in company affairs or the manager as specified in the articles of association.
- The legal representative carries both authority and personal risk, as individuals may be held liable for losses arising from breaches of fiduciary duties, failure to oversee capital contributions or other fault-based misconduct.
- Companies have to actively manage transitions, as resignation from the underlying role automatically triggers removal as legal representative and requires a replacement to be appointed within 30 days.
- A structured approach to governance, including clear internal controls and properly maintained records, is important to mitigate risk and support compliance with evolving legal requirements.
Who can be a legal representative?
Under the current Company Law of the People’s Republic of China (effective 1 July 2024), the legal representative can be any director who performs the company’s affairs or the manager, as stipulated in the company’s articles of association. This means that the role is no longer limited to the chairman of the board, any executive-level director or manager may assume it.
This reflects a significant evolution in Chinese company law. Under the original 1993 law, the role was restricted to the chairman of the board, before being expanded in the 2005 revision to include the executive director or manager. The 2024 revision goes further by allowing any director actively involved in executing company business to serve as legal representative, giving companies greater flexibility in structuring their leadership and legal accountability.
Resignation and removal mechanism
Moreover, the new Company Law introduces important rules regarding resignation. If the director or manager acting as legal representative resigns, they are deemed to have concurrently resigned as legal representative. The company must appoint a new legal representative within 30 days. If the company fails to do so, the former legal representative may file a court action to have the registration removed, which is a significant enhancement of protection for individuals in this role.
Responsibilities and risks
Two pieces of legislation define this liability framework: the Civil Code and the Company Law.
Civil liability and right of recourse
The Civil Code (Article 62) provides that where a legal representative causes damage to others in the performance of duties, the legal person shall assume civil liability. After bearing such liability, the legal person has the right to recover from the legal representative who is at fault in accordance with law or the company’s articles of association. This explicit right of recourse strengthens the accountability of the legal representative.
Company Law (Article 11) echoes this rule: the legal consequences of the legal representative’s acts performed in the name of the company shall be borne by the company; but if the legal representative causes damage due to fault, the company may claim indemnity against him/her.
Fiduciary duties
Company Law (Article 22) stipulates that where the legal representative, as a director or senior manager, breaches the company’s articles of association or fails to fulfill his/her fiduciary duties, causing losses to the company, they shall be liable for compensation. In particular, the legal representative must exercise the duty of loyalty and duty of care; engaging in self‑dealing, usurping business opportunities, or competing with the company without proper authorisation may trigger personal liability.
Capital contribution obligations
The new Company Law (Article 51) imposes a duty on directors (including those serving as legal representative) to verify and shareholders to make capital contributions on time. Failure to do so may result in personal liability for losses incurred by the company.
Conclusion
The updated legal framework, particularly the new Company Law 2024 and the Civil Code, reinforces the principle that while the company bears primary liability for the legal representative’s acts in the course of duty, the legal representative can be personally liable for fault-based misconduct. The introduction of a clear resignation mechanism and mandatory succession rules also provide better protection for individuals who wish to step down from the role.
How Acclime can help with legal representative requirements in China
Acclime supports businesses in navigating the legal representative framework in China with practical, up-to-date guidance. We assist with structuring appointments, reviewing articles of association and managing corporate secretarial filings to ensure compliance with regulatory requirements.
If you are appointing or changing a legal representative, Acclime can help ensure a smooth and compliant transition. Contact Acclime to learn more about our corporate secretarial services in China.
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
Celia Cui, Manager of CoSec Services, c.cui@acclime.com
Christophe Marquis, Director, Shanghai, c.marquis@acclime.com
