A company chop is an official stamp of the company. In China, using the company chop can officially represent the company, just like the signature of the company’s legal representative.
There are five mandatory company chops: the official company chop, financial chop, legal representative chop, contract chop, and invoice chop. There are other kinds of chops that are optional.
Only entities that are authorized by the Public Security Bureau in China are entitled to engrave chops.
Due to the importance of the company chops, it is very important to keep them safe and implement strict rules on their use.
In China’s business landscape, the official company chop, or seal, is a vital tool for authenticating documents, contracts, and transactions. This stamp represents a business’s authority and carries significant weight in formal dealings.
Due to their importance, the chops shall be properly saved and given to a reliable person. Such can also be kept by a third party, like Air Corporate, for custody.
What are Company Chops in China?
A company chop is an official stamp or seal engraved with a company’s registered corporate name. Company chops, also known as seals or stamps, are essential for business transactions in China. While signatures typically validate documents and transactions in most other countries, in China, this authority lies with the company chop.
Given the importance of company chops and possible repercussions, it is important to handle and store them securely. The seal is temporarily held by the person in control of the company or other authorized management personnel.
There are many cases where chops were misused. As a result, the company shall be very careful and limit access to the chops to limited persons only.
After registering with the Administration for Market Regulation (AMR), foreign-invested enterprises (FIEs) must produce a company chop. The chop, which is submitted to the Public Security Bureau (PSB), includes the entire registered name of the company in Chinese.
Types of China Company Chops
Depending on the business scope, a company will most probably require several chops in addition to the official company chop, each used for different purposes and on various official documents.
The following are the five main types of China company chops, while additional ones may be used under specific situations.
- Official company chop [Mandatory]
- Financial chop [Mandatory]
- Legal representative chop [Mandatory]
- Contract chop [Optional]
- Invoice chop [Mandatory for the issuing of invoice]
Official Company Chop
A government-issued seal that is required for Chinese companies is called an official company chop. The official company chop is used to execute any document signed by the company.
This seal is necessary for both internal and external issues since it represents a company's legal personhood. Certificates, contracts, introduction letters, official paperwork, and other company documents all use it. But, some documents may require specialized chops (e.g., invoices).
The official company chop must be protected. Severe legal repercussions may result from any misuse.
Financial Chop
All businesses must have a financial chop used for financial matters and paperwork like opening bank accounts, issuing checks, and authenticating tax filings and compliance documents.
A financial chop is mandatory, but the company chop is sometimes sufficient as it can be used in the financial chop’s place. For this reason, in order to prevent misuse, companies keep their financial and company chops separate.
The finance chop needs to be registered with both the company's bank and the Public Security Bureau (PSB).
Legal Representative Chop
The person registered as the legal representative of the company may use the legal representative's personal chop in place of or in addition to his/her signature. In his/her absence, the legal representative's signature is represented by this chop, which is registered with the company's bank and the PSB.
When used alone or in conjunction with the company chop, the legal representative's chop denotes an official company decision because they have the power to bind the company. It is mostly used for financial operations, including cash withdrawals, cheque issuance, and payment approval. Contracts can be signed with it as well.
As there is only one legal representative, there shall only be one legal representative’s chop.. Using it alone or together with the company chop is considered an official company activity.
Contract Chop
Many companies sign contracts with clients or employees using another contract chop. In contractual situations, this chop can be used in place of the company's chop, even if this chop is not legally required. It is useful for delegating signing power.
Contracts are signed on the company's behalf using the contract chop. It has every right and obligation and may act as the company's representative within the parameters of the contract. Any contract or agreement pertaining to business with third parties may employ this chop. However, it can only be used and possessed by authorized personnel.
Invoice Chop
In order to issue official invoices as well as tax receipts (fapiao), the invoice chop is required. For a purchase to be claimed as a business expense, a chopped invoice is needed.
Customs Chop
The customs chop is necessary for companies who engage in cross-border trade. It is required for all business operations involving imports or exports and is used for customs declarations on imported and exported items.
The employee or employees in charge of handling import and export concerns usually keep the chop. The chop should only be accessible by authorized personnel in order to maintain security and compliance.
Electronic Chop
In China, the digital equivalent of a company chop is called an electronic chop. Physical chops are replaced by these legally recognized electronic chops, which allow for quick and paperless transactions. They can be used to sign contracts and send invoices, among various other purposes.
The PRC's Electronic Signature Law was revised in 2019, giving electronic signatures—including electronic chops—the same legal standing as physical seals.
Although there are some exceptions, parties can agree on whether or not to use electronic signatures in contracts and other agreements. An authorized company representative must be associated with the creation and use of an electronic chop.
Other Chops
Other types of chops may exist. For instance, some companies have an HK chop for the sole purpose of the execution of employee labor contracts.
How to Secure Your Company Chops in China
Securing your company chops is crucial for maintaining the integrity and safety of your business operations in China. Here are key strategies to ensure their protection:
- Implement Strict Access Control: Limit access to authorized personnel only. Keep a register for the use of all chops with clear details.
- Use a Secure Storage Solution: Store chops in a locked, secure location, such as a safe or a designated security box, especially when not in use.
- Establish Clear Usage Policies: Set guidelines for when and how chops can be used. Ensure all relevant employees who may be entitled to use the chops understand these policies to avoid misuse.
- Regularly Audit Usage: Conduct periodic audits to track chop usage, detect any anomalies, and prevent unauthorized access.
- Consider Digital Alternatives: Where possible, use digital signatures with enhanced security features, which are becoming more accepted in business dealings.
- Insure Against Loss or Misuse: Consider obtaining insurance to protect against potential losses resulting from misuse or theft of company chops.
Taking these steps helps safeguard your company chops, reducing risks and ensuring your business remains compliant and secure.
