Editor’s Note: In cooperation with Shekou Foreign Legal Assistance Center, Shenzhen Daily runs a Monthly Topic column on the topics that expats are most concerned about by inviting lawyers, or notaries and other professionals to answer questions regarding visas, taxes, medical services, investment and employment, among others.

Legal terms about

running a business

Q: What is a legal representative?

A: A legal representative is the major principal who acts on behalf of the legal entity to perform its civil rights and obligations according to laws and the company’s Articles of Association.

To some extent, serving as the company’s legal representative usually means controlling the company’s core power.

Q: Who can be a legal representative?

A: According to the Company Law, the chairman of the board, the executive director or the company’s manager can act as the company’s legal representative.

Q: What are the legal representative’s duties?

A: He or she takes responsibility for organizing and leading production and operation activities within the company and shall act on the company’s behalf to sign legal documents.

He or she undertakes the responsibilities required by laws, regulations or the company’s Articles of Association, including hosting the board of directors or shareholders’ meetings.

Q: What is registered capital?

A: Registered capital is the capital raised by the company at the time of establishment, stated in the Articles of Association and registered by the company registration authority, and is the amount of capital contribution subscribed by the shareholders.

Q: What can be valued as registered capital?

A: Cash, intellectual property rights, land use right, know-how, trademarks, machinery and equipment can be valued as registered capital.

Q: How and when to pay the registered capital?

A: Shareholders can set up the rules of paying registered capital in the Articles of Association.

Q: What can you do with the registered capital?

A: Registered capital can be used to pay all the business operation expenses, such as office rent, staff salaries and payment for goods and services the company needs.

Q: What are the consequences should the registered capital not be paid by the shareholders?

A: The capital contribution not yet paid by the shareholders shall be regarded as liquidation property.

When the company’s property is insufficient to pay off its debts, the shareholders as well as other shareholders or subscribers at the time of the company’s incorporation, who have not paid their capital contributions, shall bear joint and several liabilities to pay off the company’s debts within the scope of the unpaid capital contributions.