Answer in one line: A company chop is a company’s official seal. In China, stamping a chop on a contract is a standard way to bind the company — and the chop can create a binding obligation even when the person who used it should not have.
What is a company chop?
In many Western countries a signature executes a contract; in Chinese practice the seal does much of that work. A registered company normally has several chops: the company chop for general business, the finance chop for banking and accounting, the contract chop, and the legal representative’s personal seal. The company chop is the most powerful because it stands for the company itself. Chops are engraved from the company’s registration details and filed with the public security authorities, and losing one is a genuine risk rather than an administrative nuisance.
When does a chop legally bind the company?
The Civil Code gives the chop its force. Article 490 provides that where parties conclude a contract in written form, the contract is formed when they sign, affix their seals, or put their fingerprints. So your chop, not a director’s signature, can be what creates the contract. Article 61 explains why: the legal representative acts for the company, acts done in the company’s name are borne by the company, and limits on that authority in the articles cannot be set against a counterparty acting in good faith. Article 504 adds that even where the legal representative exceeds their authority, the contract still binds the company unless the other side knew or should have known of the limit.
Courts therefore look mainly at whether the person who used the chop had actual or apparent authority, rather than whether the seal was genuine — a principle sometimes summarised as “look at the person, not the seal”.
What this means in practice
For a foreign investor this cuts both ways. Verify who may use the chop before you sign, and consider a board resolution restricting its use in major transactions. Keep it under controlled custody: a chop left with an office manager, a departing partner or a local agent can sign contracts or bank documents in your company’s name. When you receive a document from a Chinese counterparty, ask for the business licence and the legal representative’s details. If a chop is misused, the company’s main remedy is to sue the user for damages — but the signed contract may still be enforceable against the company.
Hypothetical scenario: a foreign company’s Chinese subsidiary keeps its chop in the finance office. A manager uses it to sign a guarantee in the company’s name without board approval. If the lender had no reason to know of the internal limit, the subsidiary can be held to the guarantee even though no director signed it.
The bottom line: in China the chop is the company. Treat it as a key asset, because a single stamp can create a binding obligation.
Wang Guan | Co-founder, Beijing Haolue Law Firm | +86 17813108512