COMPANY CHOPS IN CHINA

Introduction to Chops in China

A "Chop" is necessary for approving decisions relating to the operations and management of a company in China and legally authorising documentation.

A Company may hold a wide range of chops in China, each being used for different purposes and applying to different documentation. Whilst the Company Chop is mandatory for every company incorporated in China, there are also a number of chops which only have a very specific scope and power. These chops are not mandatory and may include the Financial chop, Human Resources chop, and the Contract chop. Such 'specific' chops provide company departments with the ability to, for example, enter into contracts on behalf of the company without having to gain the seal of the Company Chop.

Types of Chops of a Enterprise (Organisation)

Company chop: The Company chop is often in round in shape with the registered name of a company engraved on the bottom of the seal. Each company must have only one Company chop and the engraved seal must be approved by the Public Security Bureau (PSB). Once the company is successfully registered with the Administration of Industry and Commerce (AIC), a qualified chop-maker (approved by the PSB) must be engaged to produce the Company Chop.

The Company Chop is the most important and powerful chop held by corporation. It provides legal execution for all documents and is at least required when any important documents are signed, issued or to be changed. For example, any changes to corporate documents, opening of a bank account, issuing a certificate for an employee, or altering the name or business scope of the company all require the Company Chop to be legally binding.

Financial chop: Financial chop is predominately used for issuing a check and processing transactions with a bank.

Human Resource chop: The Human Resources chop is used where the company signs a labor contract with any of its staff. Many government bodies also require this chop to be stamped on official company documents such as employment proof letters for employee registration purposes.

Contract chop: Contract chop is only used for the purpose of stamping contracts, particularly for trading contracts.

Use and safeguarding of chops

Generally, a personal signature and the chop are used together during the process of signing a legal document. A document with a signature and stamped with company chop is deemed as approved by the company or the CEO (appointed by Board of Directors to act on behalf of the company), and is legally binding.

Unauthorised and inappropriate use of chops may cause legal problems for the company. In order to prevent anything detrimental to the company, an appropriate chop management system should be in place. The Executive Director or General Manager (if directed by or named by the Company Legal Representative) is ultimately responsible and held legally accountable for the Company's chop management. However, they can assign specific persons to manage the chops, including the delivery, collection and using of chop.

The following principles should be followed for proper use and management of chops:
1. All chops should be used and kept by the persons (positions) as specified by the General Manager and CEO.
2. The chop should be physically kept by the specified person designated by the general manager and should not be passed to others without prior approval.
3. A chop-management-card (or application system) should be established to record details such as the date, user's name, authorization justification and signature of the designated chop-holder. The information about the use and return of chops must be recorded on individual user-cards.
4. The chop-holder should return the chop prior to resigning from or leaving the company.
5. Anyone who wants to use a chop should first seek written approval from the General Manager and CEO.
6. Authorisations approved by the General Manager and the CEO are effective immediately
7. The company should detail specific instances (documents) which require both the chop and authorized signature to be legally valid.
8. The general manager has the full control over all chops.
9. The use and delegation of any 'specific' chops to various company departments should be based on operational and efficiency decisions.
10. The keeper of the chop must take care of the chop, and report the use of the chop to his direct management.

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