A chop in China is a stamp used internally and externally for a company to execute documents. Administrative filings, bank documents, contracts, etc., are clear examples.  Application of the chop alone creates a presumption to make a contract binding, unless the other party has reason to suspect the person applying the chop did not have authority to do so.  No personal signature is needed in addition to the chop though the smart counterparty will sometimes, out of an abundance of caution, ask for the contract to be personally signed as well by a senior officer.

Official chop

This is the primary chop that is used most broadly in China. In addition, an official company chop is required where a major document requires legal authorization. For instance, a change in a business name, the opening of a corporate bank account, for a change in business scope, etc.  The official chop is an all-purpose chop that can often be used in place of some of the other specific purpose chops described below.

Financial chop

This chop is used for related financial documents such as checks, bank account opening, tax-related documents, etc.  

Contract Chop

In some cases, an organization uses a contracts chop to enter into an agreement.  It can substitute for the official chop, but in most cases is used for lower value, routine contracts which do not need to go through the same level of strict control procedures surrounding use of the general official chop above.

Electronic Chop

There is now also a digital seal for online contracts and financial transactions. Like the physical seal, the digital seal is presumptively legally binding.  There must, however, be corresponding internal control procedures and records on the data for creation and uses of the electronic chop.  

Customs Chop

Any Chinese company that imports and exports goods must own a customs chop, which is required to validate a company's import and export declarations.

Legal Representative Chop

This is a personal chop for the official legal representative of an organization.  Each company has only one legal representative, which executes major documents on behalf of the organization. 

Invoice (Fapiao) Chop

This chop is required when tax receipts and invoices (fapiao) are issued. In addition, to declare an item a business expense, it is necessary the invoice chop appears on the fapiao.

Protecting the Use of the Chop

Given its presumed authority to bind companies on legal documents, the chop must be protected at all costs. Not surprisingly, there have been several legal battles  in China due to misuse or forgery of company chops. It is essential for the company to design an effective internal control system to protect chop usage. 

One such control could be a company's main chop only being applied if one or two holders of other company chops first also applied their chops.  For example, the CFO often holding the finance chop. 

In addition to these checks and balances, physical access to chops should be restricted and a logbook should be created within the organization, which records the chop's usage by whom and for what purpose. No single person should have access without multiple authorizations from other individuals. 

Engage a legal advisor to help you efficiently review your business contracts with distributor, suppliers, and other partners to make sure you are legally protected. 

Contact us at inquiries@ChinaLawSolutions.com for more information.