Legal Representative of WFOE | Price Cao Law Blog

The legal representative of a WFOE is the person with authority to legally bind the entity.
Under the PRC Company Law, a legal representative shall have duty of loyalty and duty of diligence towards the company Legal Representative
The legal representative of a WFOE is the person with authority to legally bind the entity.
Under the PRC Company Law, a legal representative shall have duty of loyalty and duty of diligence towards the company for which he/she serves. If the legal representative fails to perform his/her statutory duties under the law and cause losses for the company, he/she shall take the liabilities for the company.
Pursuant to the Criminal Law, a legal representative who breaches his/her duty under the Company Law may be liable for crime of bribery, crime of property embezzlement, crime of misappropriation of company funds, fraudulent bankruptcy, etc. (as the case may be).
In addition to the aforesaid liabilities, the legal representative of the company, as its special position, may bear other liabilities if the company conducts the following illegal activities: Article 49 of the General Principles of Civil Law of the People?s Republic of China, promulgated by the National People?s Congress on April 12, 1986, effective from January 1, 2007, provides that:
?Should any one of the following circumstances apply to a corporation, it shall assume liability and, in addition, its legal representative may be subject to administrative sanction or a fine; if a crime is constituted, criminal liability shall be investigated and determined according to law :
(i) carrying out illegal business activities beyond the scope of business approved and registered by the registration authority;
(ii) concealing the true facts from the registration or tax authorities, or practicing fraud;
(iii) extracting funds or concealing assets for the purpose of evading debts;
(iv) disposing of properties without authorization following dissolution, annulment or declaration of bankruptcy;
(v) failing to apply immediately for the registration and public announcement of a change or of termination, causing an interested party to suffer substantial loss; and
(vi) engaging in other activities prohibited by law, causing damage to State or common public interests.?
Under such provisions, civil and administrative liabilities for a legal representative are statutory liabilities, no matter whether the legal representative actually knows or involves the above illegal conducts.
Furthermore, pursuant to Article 31 of the Criminal Law, ?Where a corporation commits a crime, it shall be fined, and criminal punishment shall be imposed on the persons who are directly in charge and the other persons who are directly responsible for the crime??
In other words, a legal representative does not always bear criminal liabilities for the crime committed by the company, notwithstanding the fact that in most of cases, a legal representative would be deemed as the person who is directly in charge of the crime of the company. If there is evidence to prove that the legal representative is not the person in charge of the crime committed by the company, he/she would not be subject to criminal punishment.
which he/she serves. If the legal representative fails to perform his/her statutory duties under the law and cause losses for the company, he/she shall take the liabilities for the company.
Pursuant to the Criminal Law, a legal representative who breaches his/her duty under the Company Law may be liable for crime of bribery, crime of property embezzlement, crime of misappropriation of company funds, fraudulent bankruptcy, etc. (as the case may be).
In addition to the aforesaid liabilities, the legal representative of the company, as its special position, may bear other liabilities if the company conducts the following illegal activities: Article 49 of the General Principles of Civil Law of the People?s Republic of China, promulgated by the National People?s Congress on April 12, 1986, effective from January 1, 2007, provides that:
?Should any one of the following circumstances apply to a corporation, it shall assume liability and, in addition, its legal representative may be subject to administrative sanction or a fine; if a crime is constituted, criminal liability shall be investigated and determined according to law :
(i) carrying out illegal business activities beyond the scope of business approved and registered by the registration authority;
(ii) concealing the true facts from the registration or tax authorities, or practicing fraud;
(iii) extracting funds or concealing assets for the purpose of evading debts;
(iv) disposing of properties without authorization following dissolution, annulment or declaration of bankruptcy;
(v) failing to apply immediately for the registration and public announcement of a change or of termination, causing an interested party to suffer substantial loss; and
(vi) engaging in other activities prohibited by law, causing damage to State or common public interests.?
Under such provisions, civil and administrative liabilities for a legal representative are statutory liabilities, no matter whether the legal representative actually knows or involves the above illegal conducts.
Furthermore, pursuant to Article 31 of the Criminal Law, ?Where a corporation commits a crime, it shall be fined, and criminal punishment shall be imposed on the persons who are directly in charge and the other persons who are directly responsible for the crime??
In other words, a legal representative does not always bear criminal liabilities for the crime committed by the company, notwithstanding the fact that in most of cases, a legal representative would be deemed as the person who is directly in charge of the crime of the company. If there is evidence to prove that the legal representative is not the person in charge of the crime committed by the company, he/she would not be subject to criminal punishment.

Source: http://pricecaolawblog.com/?p=165

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