A company chop is the carved official seal that a Chinese company registers with the Public Security Bureau when it is formed. In Chinese practice, the chop — not a signature — is the primary way a company expresses corporate intent. A contract, guarantee or bank form stamped with the genuine chop will usually bind the company, even if the person who applied it lacked internal authorization.
Why it matters
Foreign managers think in terms of authorized signatories; Chinese counterparties, courts and banks think in terms of chops. Whoever physically holds the chop can, as a practical matter, sign contracts, open liabilities and deal with the bank on the company's behalf. This makes chop custody a governance question on par with board control — especially in a joint venture, where the partner holding the chop effectively runs the company. Companies typically hold several chops (company chop, financial chop, fapiao chop, contract chop, plus the legal representative's personal seal), each with different uses and risks.
How it works in practice
A UK investor in a Shanghai trading WFOE fires its local general manager for cause. The manager refuses to return the company chop and continues stamping supplier agreements. Because the chop is genuine, counterparties acting in good faith can hold the company to those contracts. The investor must publish a chop invalidation notice, re-carve and re-register the chops, and update SAMR and bank records — weeks of disruption a chop custody policy would have prevented.
Common mistakes
- Leaving all chops with one local employee with no log of use
- Verifying a contract by signature only, without checking that the chop matches the counterparty's exact registered Chinese name
- Treating the financial chop and company chop as interchangeable
- Failing to retrieve chops, licenses and bank keys immediately when terminating a legal representative or GM
- Accepting a photocopied or scanned chop on an original contract