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What are the Different types of Chinese Company Chops and How to Use Them?

October 23, 2018

To validate a document within China and as a result conduct or operate a business in China, you would generally need to use the official company chop of your organization. These chops are special government issued seals (or stamps), which all business entities in China have and are of the utmost importance to the organization. Even though signatures can be used to validate documents, stamping the document with the relevant chop makes a document truly legally binding.

 

To provide a better understanding about the different company chops organizations may have at their disposal in China, we have prepared an overview of the different types of chops' its purpose and application.

 

These are the following:

  • The company chop

  • Finance chop

  • Legal representative chop

  • Custom chop

  • Contract chop

  • Invoice chop

 

 

1. Company Chop

The company chop is the most important seal to any company in China. The company seal is issued by Chinese authorities and therefore the information is also registered at these authorities.

  • Purpose: this seal can handle internal and external affairs and in these instances the company chop represents a company's official decision (comparatively to a signature in the West).

  • Application: for any official letters provided by the company, any supporting documents for relevant authorities, and used to sign contracts and issue official reports to the public.

  • Attention: this seal must be safeguarded by the legal representative(s) only. Once the company chop is used or chopped on any documents, it implies that the company has confirmed or agreed upon any activities, as well as acceptance and awareness of any subsequent risks or consequences attached to those activities. Furthermore, if a document is chopped the company shall bear all responsibilities for the consequences of using the company chop.

 

2. Finance Chop

It is also mandatory to have a finance chop in China, however, the company chop can often be used in its stead. The chop has to be registered with the Chinese State Administration for Industry and Commerce as well as the company's bank.

  • Purpose: this seal is used for handling any affairs or documents related to financing.

  • Application: can be used for actions such as opening a bank account, authenticating financial documents, issuing checks, as well as performing bank related transactions.

  • Attention: it is advisable to keep the company- and finance chop separated in order to prevent misuse.

 

3. Legal Representative Chop

As the name does make you suspect, this chop is owned by the company's legal representative. This person is the principal of the company and is identified by name on the business license. It is important to note that the legal representative has the authority to enter into binding obligations.

  • Purpose: mostly used for financial activities, but also represents the signature of the company legal representative in its absence.

  • Application: commonly used to issue company cheques, for approval of payment transactions, and to withdraw cash from the bank (alternatively used to sign contracts).

  • Attention: this chop shall be kept by the company legal representative only. If the chop has been used solely or along with the company chop, it represents an official company decision.

 

4. Custom Chop

This chop is used for import or export related business and any information for the chop must be registered with the customs authority. 

  • Purpose: the chop will be used when the company has any imported or exported goods which need to be declared and reported to the Chinese customs.

  • Application: the custom chop shall be used in the port or custom authorization and control area indicated by the company.

  • Attention: the chop has to be kept by the employee(s) whom is in charge of dealing with import and export related affairs only. Without this chop the company will not be able to process any imports or exports.

 

5. Contract Chop

A large number of companies use a separate chop for signing contracts between parties (such as the company and its employees, or the company and a third-party such as a client).

  • Purpose: to sign contracts on behalf of the company. It may represent the company within the scope of the contract and shall bear all rights and obligations therefrom.

  • Application: used for any business-related contract and agreements with third-parties.

  • Attention: as this chop grants the person responsible less authority than the company chop it is useful for delegating authority. Nevertheless, only the person permitted to use this chop may keep it.

 

6. Invoice Chop

  • Purpose: to issue official invoices or tax receipts (fapiao).

  • Application: chopping an invoice is required to declare a business expense.

 

Conclusion

A document which is chopped by the company, can become legally binding in China. This means that whom has physical access to the chops can effectively take legally binding decision in China on behalf of the company. As of this reason, we would recommend to carefully manage using chops in your company, either have a dedicated staff member taking care of this item or choosing to outsource this service to an independent company which is experienced in managing chops of the company.

 

MS Advisory has much experience in supporting foreign enterprises on various compliance procedures. If you are interested to learn more about our services, please do not hesitate to contact us at info@msadvisory.com

 

Or alternatively take a look at our Accounting Services

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