One of the inevitable topics of doing business in China is the company seals. The use of seals instead of signatures to exercise the power of companies or other entities in China has a long history. So, what seals does the company have? How do they use them and what legal effects do they have? What are points we need to pay attention to avoid counterfeit seals?
Monx has prepared this ultimate Q&A about the official seal of Chinese companies, and hope it could be helpful for your business operation in China.
- Q: What kinds of company seals are there, and what are their uses?
A: There are five main types of company seals:
- Company official seal:
The company official seal can be used for all the company’s external affairs processing, business, taxation, banking, and other external affairs processing needs to be stamped, usually called company chop or company seal.
- Special financial seal:
it is used for the issuance of company bank bills, checks or other bank and financial documents which are needed to be affixed when they are issued, usually called the financial seal.
- Special contract seal:
This seal usually needs to be stamped when the company signs the contract.
- Legal representative’s seal:
This seal is used for some specific purposes, should be affixed when the company issues banknotes, other bank documents, company custom documents, or other cases requested, usually called the legal rep seal or the name seal
- Invoice seal:
As per its name, the invoice seal is used when the company issues an official VAT invoice.
- Q: What should I do if the seal is stolen, robbed or lost?
A: If the seal is stolen (robbed), the enterprise shall not be liable for disputes arising from the use of that seal.
However, the enterprise has the responsibility to inform the companies, individuals that have business dealings with the company and the public through newspapers and other methods that the company seal has been lost, and to remake it in time.
- Q: Is there a difference in legal effect for different seals?
A: There is no difference between the level of legal effect in the strict sense. As long as it meets the stamping requirements of the law and the usage expresses the meaning of the company, the stamp is valid. However, due to the different sizes or types of seals used, people might think that the effective size of the seal is divided.
The company official seal has the widest range of use among all seals and is a symbol of the rights of the legal entity.
In the current legislation and judicial practice, the examination of whether the company official seal is stamped has become an important criterion for judging whether a civil activity is established and effective.
Except for special provisions of the law (such as the stamping of invoices), the official seal can represent the will of the legal entity, and the signing of contracts and other legal documents with external parties has legal effect.
All letters, official documents, contracts, issued in the name of the company can use the official seal.
- Q: If I borrow the official seal to others and they have signed a guarantee contract privately. Is this contract still valid?
As an independent corporate legal entity, the company seal is the tangible representative and legal certificate for its external activities.
If the company voluntarily borrows the company seal for use by internal staffs or external entities, it shall be deemed that the company authorizes others to use the company seal, and the rights and obligations arising from the seal shall be borne by the company. Therefore, the guarantee contract that the company official seal is used by others and signed privately is valid, and the company needs to bear the guarantee responsibility.
- Q: Can I set some rules in the Articles of Association or other internal companies’ policy for the use of the seal? Is the contract chopped in violation of these policies or clauses of articles of association valid?
A: The company’s articles of association or internal policy can stipulate the rules for the use of the seal, but since these documents are only binding on the inside, if the counterparty is in good faith, even if the use of the seal violates these clauses, the contract is valid.
However, the person who violates the rules and uses the official seal to damage the company’s interests shall be liable to the company.
- Q: What risks will the company encounter in terms of seals during the operation of the company?
A: The company’s common risks in the seal are as follows:
(1) The use of counterfeit seals by others.
(2) Another person uses the scanned and printed seal.
(3) The other party uses an internal department seal that has not been filed and so that there is no qualification.
Due to the high incidence of the above-mentioned risks, companies should be vigilant and do a good job of reviewing the transactions. For example, you can check the authenticity of the seal by asking the other party to provide the company’s seal-engraving permission or entrust a lawyer to investigate the other party’s seal filing, carefully review whether there are imprints of official seals such as mimeographs that are in normal use, and reject the other party’s non-compliance usage of seals, etc.
- Q: After the company has changed its name and the new official seal has been made. Is the contract with the previous seal still valid for the company?
The change of the company name does not affect the responsibilities surged with the previous company name. The documents with the previous company name seal still have a legal effect on the company.
Therefore, the previous company seals should be properly kept. If necessary, the seal can be destroyed and deregistered to reduce legal risks.
- Q: I have heard about the electronical company seals or e-seals. How does it work?
A: With the implementation of the “Electronic Signature Law”, electronic seals and signatures have been gained legal effect.
The so-called electronic seal/e-seals/signature is not the image of the physical seal, but the data contained in the data message in electronic form and attached to identify the signer’s identity and show that the signer approves the content.
In one word, an electronic seal or signature is an electronic data key that can identify a specific sealer or signer.
- Q: Under what circumstances can electronic seals be used? Is there any limit?
A: Except for situations where electronic documents are not applicable to laws and regulations, you can feel free to use electronic seals.
Electronic seals are not applicable to:
(1) Issues involving personal relationships such as marriage, adoption, inheritance, etc.;
(2) Issues involving the transfer of real estate property rights and interests such as land and houses;
(3) Issues involving the suspension of public utility services such as water, heat, gas, or electricity.
(4) Other circumstances in which electronic documents are not applicable as foreseen by laws and administrative regulations.
How Monx can help me in this case?
With the support of innovation technology, we can facilitate the management of your company seals and guarantee the compliance usage and custodian of company seals in China.
Feel free to contact us!