General Provisions of Civil Law of People’s Republic of China (GPCL), the opening of the Civil Code of China, has come into force since October 1st 2017. Legal Person system is one of the most important constituent parts of GPCL, which specifies, adjusts and/or amends the corresponding contents of the Company Law. Today we’d like to introduce some of the contents relating to the Legal Representative.

1、Clarifying the legitimate basis of the Activities of Legal Representative

Article 61 of GPCL specifies that if the legal representative of a legal person engages in civil activities in the name of the legal person, the legal consequences incurred shall be undertaken by the legal person. And even if there is restriction on the legal representative’s right of representation imposed by Articles of Association or its authoritative body, such restriction shall not challenge any bona fide third party. In other words, even if the Legal Representative signs a contract beyond his/her authority in the name of the company, the contract shall still be valid to the company.

Though the legal practice has been exercising such principles in accordance with Company Law and Contract Law, this time the GPCL has clarified the consequences of the legal representative’s activities at the Civil Law level, which provides a clearer legitimate basis for legal practice.

2、Legal Representative’s liabilities

Before GPLC came into force, the laws didn’t specify who shall be liable for the damages to others caused by legal representative’s post behavior. In practice, Art. 34 of Tort Law is usually applied under this circumstance,” Employers shall bear tortious liability for any injury or damage caused to other people by their employees in the course of their work.” However, sometimes the legal representative isn’t employed by the company, thus not an employee of the company. Therefore it’s not always appropriate to apply this provision.

Art. 62 of GPLC specifies that the legal person shall undertake the civil liabilities when the legal representative causes others’ damages due to work, and furthermore, stipulates that after taking the said liabilities, the legal person may claim compensation to the legal representative who’s in fault in accordance with Laws or Articles of Association. This provision has filled in the blank in this field, and further authorized AoA the right to claim compensation against the legal representative who’s in fault, which becomes the legitimate basis of Legal Representative’s liabilities.

Now you may see how important the legal representative is to a company. Besides GPLC, there’re also other Laws and Regulations such as Company Law have provisions regarding legal representative. If you have any further questions, please send an email to info@dandreapartners.com.