We’ve previously written about how to find out the name of the legal representative of a Chinese company via their business license. In that article, we briefly covered what a legal representative actually is:
“There’s a good chance that this person won’t be someone with much real authority in the management of the company. … It could be a mistake to demand contact with the legal representative or to require their participation in your communications with the company. In many cases this person’s role as legal representative is not immediately relevant to the management of the company and it’s perfectly legitimate that they do not participate directly in your business relationship.”
We’ve noticed that some other company verification providers claim in their reports that anyone who isn’t the legal representative “is not authorised to represent” the company in question. This statement is highly misleading. It is in fact the norm that you will not deal with the legal representative of a Chinese company.
Demanding proof that you’re communicating with the legal representative of a company is akin to demanding to speak to the CEO, founder or owner of the company. By the nature of the role, there is only one in the whole company and chances are that they are not on the sales or marketing team. Also note that ‘legal representative’ will not be this person’s job title. It is a legal responsibility that they shoulder, but probably does not impact their day-to-day duties.
So whilst it’s true that someone other than the legal representative cannot undertake highly formal legal responsibilities for the company, other employees may very much be authorised by the company to represent it in business. If someone is in sales, representing the company is the main function of their job.
The issue here isn’t that the term ‘legal representative’ is confusing in itself. The real source of confusion is that apart from the legal representative, a standard Chinese business license doesn’t give any other names of real people. A major motivation to verify a Chinese company via their official registration is to confirm that you’re actually dealing with someone you can trust. People want to get hold of an officially recorded name of a real person, so they focus on the legal representative.
Verifying the company by their official registration record confirms that they are a real company that exists, as well as a range of revealing details about them. However, it’s much harder to prove that you are genuinely in contact with this company, or that the particular person you’re communicating with is trustworthy.
Because of this, we frequently get requests from clients who wish to confirm that a particular person does actually work for the company they are interested in. In these cases, we can verify that the company in question is officially registered, and take a close look at their registration details to see what insight can be gained from those.
Confirming with total certainty that a client is genuinely in contact with that company or that a particular individual works at that company is impossible, though. One of our main principles in researching companies is that we do not contact the company being researched, in order to stay totally impartial and independent (we also do this to be discrete and avoid revealing to the company that we’re doing research on them). This rules out contacting the company directly to ask about the names of their employees. They could legitimately refuse to give this information out anyway.
Whilst the business license and AIC records of a Chinese company will only reveal the name of the legal representative, it is possible to get hold of other names through more involved research. The names of shareholders and the board of directors can nearly always be acquired by sending a lawyer to the relevant AIC to collect the records in hard-copy.
Again, it may be unreasonable to demand that all communication comes from a shareholder or director. Further approaches to reassure yourself in these circumstances are:
As you can see, there is no silver bullet for verifying a Chinese company or the person you’re communicating with. Background research is only one part of the process: verification, referencing, audits and inspections all play their part in doing business safely in China.
We often come across China company English names which we feel are misleading.
They are misleading for a number of reasons - some accidental, some deliberate, some cynical - but the root cause is that companies from Mainland China are registered in the Chinese language, not in English.
Here we give some background on China company English names and introduce the 5 ways in which we find they can be misleading.
China Customs Enterprise Classification is a system used by China Customs to grade companies which engage in foreign trade.
Following a long implementation phase, a new classification system was confirmed in May 2018. It had been updated primarily to reflect China's broader implementation of a nationwide social credit system in recent years..
Under the new China Customs Enterprise Classification system, companies are no longer ranked AA, A, B, C or D - there are now 4 different categories which are introduced in this article.
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Depending on whether your business is in Mainland China, Hong Kong, Macau or Taiwan you could well need to be looking at 4 different exchange rates.
Here we introduce each of the 4 Chinese currency currently in use in "Greater China" - the Renminbi, Hong Kong Dollar, Macau Pataca & New Taiwan Dollar.