In China, the seals of a company play an important role in a company’s daily business operations. All companies are supposed to have at least three seals in total; namely, the Company Seal, the Legal Representative Seal, and the Financial Seal. These three seals are supposed to be made in a seal-making company assigned by the government. A specimen of the impression must be filed with the local Public Security Bureau during the process of a company’s incorporating procedure.
In addition, many companies also have special seals for different purposes or special seals that are applicable within different departments of a company, such as a contract seal, an administration seal, and so on. Each seal has a different function and is applied to different specific scenarios.
In our daily operation, what is important? What are we supposed to pay attention to?
Type of Seals
a) Company Seal
The Company Seal is the most powerful of all the seals of a company. It is the symbol of the company’s highest power. On an official company business-related document, (whether it is a contract, a statement or a letter of commitment), when the Company Seal is affixed, it means the content of the document is recognized by the company and the company is going to bear the corresponding legal responsibility. Generally speaking, the Company Seal can be used in all matters and occasions inside and outside the company.
b) Legal Representative Seal
There are many cases in which the Legal Representative Seal is used for a specific purpose, such as to be used together with the Financial Seal for opening the company’s basic bank account, with a specimen of the impression card reserved in the bank. When the company issues a bill, for example, it affixes the Legal Representative seal to the bill.
c) Financial Seal
Generally, a Financial Seal is used together with the legal representative seal and Financial Seal is mainly used for corporate accounting and bank settlements. When it comes to financial matters, a Financial Seal is generally required.
d) Contract Seal
The Contract Seal is intended for use when entering into contracts with other parties. However, not all companies use Contract Seals, they just affix the Company Seals when they are to sign any contracts.
e) Department-Specific Seal
In addition to the above-mentioned seals, some companies, especially larger ones, frequently use Department-Specific Seals, such as Procurement Seals, Administrative Seals, etc. These seals are usually only applicable for use inside the company, without any external effectiveness.
During our daily operations, we should pay attention to the following issues:
a) Management of the Seals
Companies shall make strict management rules over the use of seals, to avoid any potential risks. For example, the Financial Seal and the Legal Representative Seal shall not be held by the same person. Do not affix the Seals to any blank paper or document.
It is important to understand that, even if a person has signed a contract with the Company Seal affixed to it, yet is without legitimate authorization, the company is still required to bear the corresponding responsibilities. After all, it is difficult to ask any third party to check whether the affixation of the Company Seal is duly authorized . The company has the responsibility and duty to manage its own Seals.
b) Signature or Seal?
In China, the company has to affix its Company Seal or Contract Seal to the contract to make sure the contract is binding.
The signature of a shareholder, director or legal representative is usually not legally binding. This is different from what is done in many other jurisdictions and should be kept in mind.
In addition, whether the Legal Representative Seal is “chopped” or whether there is a legal representative’s signature affixed, there is no effect on the validity of the contract, unless there is a clause in the contract expressly saying that both the Company Seal and the Legal Representative Seal must be affixed for the contract to come into force.
c) Is it the correct seal?
This question is especially important for many overseas companies. The Company Seal is written with Chinese characters, thus it can be difficult to identify it. However, from the shape of the Company Seal, we can also make a judgment. As a matter of fact, from time to time, we receive emails from international buyers asking for help, claiming that they have not received goods after having made payments to trading companies. However, after reviewing their contracts, we found that they were actually dealing with a so-called “Hong Kong Company,” and it is not uncommon for Hong Kong Companies to be incorporated for the purpose of perpetrating fraud. ( You may check our post: The Top Five Things You’ll Need to Do While Purchasing PPE for more information )
Generally speaking, a Hong Kong Company has three Company Seals and one Common Seal. These three Company Seals are: one small round seal, one authorized signature seal and one oval seal. The color of the stamps are blue or purple.
Of course, if one is sure that the other party is a mainland company, it should have affixed their Company Seal or Contract Seal. Any other seals are not acceptable for a contract to come into effect
