Verifying Secondary Chop Authority in PRC Master Supply Agreements
Verify secondary contract chops against Public Security Bureau 13-digit codes and secure a primary-chopped Power of Attorney to prevent non-authorization defenses.
Dual Signature Requirement
Meaning
Corporate governance policy in Chinese subsidiaries dictates that a legal document is not binding unless it bears both the corporate chop and the signature of the legal representative or another designated director. A dual signature requirement establishes a check against the unilateral action of a single executive who holds the corporate stamp. This policy is registered in the company’s articles of association to notify third parties of the limits of individual authority.
Operational Validation
Enforcing this double authorization involves distributing the corporate seal and the legal representative’s personal chop to two different managers. The corporate seal resides in a secure location, while the legal representative’s seal is held by the finance director or a designated legal counsel. When a transaction requires execution, both custodians must independently verify the authorization before applying their respective stamps.
This structural division prevents a single individual from binding the company to a contract without internal consensus.
Regulatory Compliance
Registration of these administrative limits with the local Administration for Market Regulation provides the necessary legal protection against unauthorized transactions. Under the PRC Civil Code, a counterparty cannot claim apparent authority if the company’s public registry files explicitly outline the dual signature requirement. If a third party accepts a document that lacks the second signature, they are deemed to have acted with gross negligence.
This filing shifts the burden of proof to the counterparty in any subsequent contract dispute.
Risk Mitigation
Establishing this internal control prevents the misuse of the company’s credit and assets by local managers. It protects the joint venture from covert borrowing. This baseline protection remains the standard for international firms operating in China.