Meaning
Corporate governance instruments under Chinese law define the co-authorization requirements for binding a company to financial or legal obligations. A dual signatory resolution is an internal mandate that prevents a single director or the legal representative from executing major contracts without a second authorized signature. The instrument establishes the internal limits of representation and provides a mechanism to protect foreign shareholders from unauthorized actions by local managers.
Corporate Mandate
Internal bylaws must be drafted carefully to integrate this requirement into the company’s articles of association. When a joint venture adopts a dual signatory resolution, the company’s banking partner must be notified to configure the corporate accounts to require two distinct electronic chops for transfers. This configuration prevents the legal representative from acting unilaterally to deplete corporate funds.
Legal Validity
Statutory provisions under the PRC Civil Code state that third parties are not bound by internal corporate limitations unless they knew or should have known of them. In practice, a dual signatory resolution does not invalidate a contract signed by the legal representative alone if the counterparty acted in good faith. To protect the company, the board must register these dual authority requirements with the local market supervision bureau and include them in all standard purchase agreements.
This formal notification ensures that counterparties cannot claim ignorance, thereby making any unilateral contract unenforceable under Chinese contract law.
Operational Risk
Operational delays can occur when one signatory is unavailable due to travel or illness, pausing production orders or payments. If a dual signatory resolution leads to a dispute between the two signatories, a corporate deadlock can occur, bringing the joint venture to a standstill. Resolving such a deadlock requires a formal board meeting or shareholder intervention, which can take weeks.
