If you believed that only signatures held legal weight in China, you might not have encountered the use of a company chop. As we know, China's vast cultural differences extend to how documents gain legal validity, introducing unique aspects not commonly seen in Western practices.

The company chop is essentially a stamp that carries the same legal significance as a signature in the West. While the use of company chops might seem straightforward, there are considerations to keep in mind after recognizing the potential risks and responsibilities associated with their use.

What is a Chop/Seal?

A chop (or seal) is a tool employed to confer legal validity upon documents. Various types of chops are utilized in Chinese companies, with the official company chop being the primary one.

The official company chop is a circular or oval stamp using red ink, featuring at least the Chinese name of the company. It may also include a registration number and, in some cases, an English translation of the name. The design of stamps comes in different styles that are often indistinguishable to the average person.

Company chops can be obtained from government-authorized chop makers with approval from the public security bureau.

Company Chop vs Signature

While signatures are linked to specific individuals, the company chop represents the entire company, regardless of the person who applies it. Further details can be explored in our article on company chop versus signature.

Different Types of Company Chops

Several types of stamps are used within Chinese companies, each designated for specific document types. Some are mandatory for conducting business in China, while others are optional and used in specific instances. The key ones include:

1. Official Company Chop: Mainly used for official documents, contracts, letters, certificates, and introduction letters.

2. Legal Representative's Chop: Linked to the company's legal representative, often used for banking purposes.

3. Financial Chop: Used in banking operations, particularly for issuing checks and verifying statutory documents.

4. Contract Chop: Optional but used for signing contracts with employees and forming binding agreements with clients and suppliers.

5. Invoice (Fapiao) Chop: Mandatory for stamping invoices and tax receipts.

6. Customs Chop: Certifies import or export declarations in China, mandatory for cross-border trade.

How to Prevent Misuse of Company Chops

Expanding into China requires an awareness of the risks associated with mismanaging company chops. The company chop is directly tied to the company, and those who gain access can bind the company effectively.

To minimize the risk of misuse, consider the following measures:

1. Limit Access to the Company Chop: Entrust company chops only to trusted individuals, such as heads of each department or outsource chop management to a third party.

2. Create a Record for Chop Use: Maintain a record to identify who used the chop and when.

3. Accompany Stamped Documents with the Company Chop: Require a senior executive to sign alongside the stamps for added security.

4. Conduct Regular Audits: Regularly audit company documents to identify instances of misuse.

5. Limit the Number of Company Chops: Restrict the number of chops in use to minimize potential risks.

While these precautions may seem time-consuming, they are essential to prevent legal issues that may arise from misuse. Taking these measures can safeguard your business from potential challenges, ensuring smooth operations in China.