Company Chops play a key role when doing business in China. In this article, we explain the basics regarding China Company Chops.
What is a « chop » ?
A “chop” is a stamp with the company name as it appears on its Business License. The chop is used by the company to stamp the documents it gives to third parties (contracts, administrative forms, bank documents, etc.).
Not all chops have the same value in terms of the company’s commitment or the same function.
What are the different "chops"?
There are two categories of chops:
(i) The official chops that a Chinese company must legally have, namely:
– Company Chop
– Legal Representative Chop
– Finance Chop
– Invoice Chop
– Custom Chop
The official chops have an authority and a function defined by the regulatory texts.
(ii) Unofficial chops whose creation and use are left to the discretion of the Chinese company, the most common in practice being:
– Contract Chop
– Human Resources Chop
These chops do not enjoy any official recognition and are therefore mostly reserved for the company’s internal use. They only aim at officializing the fact that a document has been stamped by the competent department.
What is Company Chop used for?
Company Chop has the power to bind the Chinese Company with respect to third parties in the same way as the signature of its legal representative.
In practice, third parties, whether co-contractors or administrations, systematically request that Company Chop be affixed to the documents handed over to them. The reverse is not necessarily true with regard to the signature of the legal representative. Company chop is therefore seen as the instrument that demonstrates the company’s commitment to the highest degree and without any possible dispute.
What is the use of the Legal Representative Chop?
The Legal Representative Chop has the authority to substitute the signature of the legal representative of the Chinese company. Consequently, it is used when the legal representative is prevented from signing and no delegation of authority has been put in place.
While the Legal Representative Chop has a significant commitment value for the company, it remains less frequently used than Company Chop.
What is the use of Finance Chop?
The Finance Chop is essentially required to execute bank documents as well as those exchanged with the State Administration of Foreign Exchange.
It can be deemed as an instrument by which these third parties ensure that a transaction has been submitted to the company’s finance department or accountant for approval.
What is the use of the Invoice Chop?
The Invoice Chop is the mark that must be included on a company invoice to give it an official character. The invoice thus marked is called “fapiao”.
The affixing of the Invoice Chop is a necessary condition for the validity of an invoice and therefore for its deductibility from a tax point of view.
What is the use of Custom Chop?
The Custom Chop is required for Chinese companies involved in import/export operations for the purpose of completing customs formalities.
What is the use of Contract Chop?
The Contract Chop is intended to replace Company Chop for the execution of contracts binding Chinese companies to third parties.
In practice, third parties generally accept that Contract Chop is used for contracts that do not involve significant stakes. On the contrary, for larger contracts, they will require that Company Chop be used.
How to get the official chops?
Official chops are issued at the request of the Chinese company either directly by the competent administration or by accredited service providers.
Normally only one copy of each official chop is issued. This frequently raises organizational problems within Chinese companies (particularly when the use of a chop is required in an establishment far from the head office).
Moreover, in terms of stamps, the Invoice Chop nowadays takes the form of an invoice machine issued to the company by the tax office. Unlike other official chops, an invoice machine can be obtained for each establishment.
How to safeguard chops?
As indicated above, some chops commit the Chinese company towards third parties. In this context, it is therefore essential to avoid any fraudulent use of chops (there are many precedents).
To this end, Chinese companies chops must be kept in a safe place (safe, secure cupboard), to which access is restricted to only a few people (legal representative, accountant), and to have a register making it possible to know who has made use of each chop and under what circumstances.