Company Chop Custody Rules

Physical Security

Storage of the seals is the most basic yet critical aspect of the governance framework designed to prevent unauthorized usage. The seals are kept in a dual-locked safe or a specialized electronic seal cabinet that tracks the time of every opening. Under company chop custody rules, the keys or access codes for the safe are held by two different individuals, typically the department head and a senior administrative officer, to ensure that no single person can access the seals alone.

This separation of duties is a standard requirement for maintaining internal control and is often scrutinized during corporate audits or due diligence processes. When the seals must be moved to an external location, such as a bank or a government office, they are transported in a secure, tamper-evident bag. A temporary custodian is appointed for the duration of the trip and they are responsible for the physical safety of the seals until they are returned to the office safe.

This strict control over the physical object of the seal is necessary because a stolen or lost chop can be used to transfer funds or sign high-value contracts without the knowledge of the board of directors.

Usage Authorization

Application of the corporate seal to a document requires a formal approval chain that mirrors the company’s hierarchy and risk tolerance. A staff member who needs a document chopped must first submit a request through the internal management system, attaching a digital copy of the document and explaining the purpose of the transaction. The company chop custody rules specify that the legal department or a designated officer must review the document to ensure it complies with the company’s bylaws and the relevant laws of the People’s Republic of China.

Once the legal review is complete, the request moves to the general manager or a member of the board for final authorization. Only after this digital or paper approval is granted can the custodian release the seal for application to the document. In many modern factories, the act of stamping is performed under a camera that captures an image of the document and the person using the seal.

This creates a permanent record that links every physical stamp to a specific authorization, making it much harder for a rogue employee to misuse the company’s legal authority.

Audit Compliance

Logging and reconciliation of seal usage are performed on a weekly or monthly basis to ensure that the physical record of stamps matches the digital approvals. Every time a seal is used, the custodian enters the date, the document name and the number of copies stamped into a physical logbook. These company chop custody rules require that the logbook be signed by both the person requesting the seal and the custodian who supervised the application.

Internal auditors then compare this logbook against the bank statements, the contract registry and the government filings to look for any discrepancies. If a stamp is found without a corresponding approval, a formal investigation is triggered to determine the intent and the impact of the unauthorized act. This rigorous monitoring is essential for protecting the company from fraud and for satisfying the compliance requirements of international partners and investors.

Proper custody of the seals is also a defense in court, as the company can argue that a stamp was fraudulent if they can show that the custody rules were strictly followed and no approval was granted for the specific document in question. The finality of these records provides a clear trail of accountability for the legal representative and the senior management team.