Normally, a Legal Representative for a China company is appointed or removed by an action of the shareholder of the company. But what if a Legal Representative simply wants to leave the role unilaterally? Are there actions the Legal Representative may take to legally terminate the position and its attendant responsibilities? This may be desirable if a Legal Representative notices that the company’s actions are against Chinese law, but where the Legal Representative is not able to affect a change in the operations or management of the company. In such a case, the best option for the Legal Representative will be to get out as fast as possible and avoid potential liabilities.
A Legal Representative must be a Director of the company, or its General Manager by law. Directors and General Managers are both employees of a company, and should have a China Employment Agreement setting forth responsibilities of both parties. The Employment Agreement will outline steps for termination of the employment, and the employment will also be subject to provisions of China law as regards Labor Contract termination.
A Legal Representative wanting to end the role should approach the matter as a typical employee ending an Employment Agreement. Notice would be given to the company, and the individual may leave the employment. Of course, the employee will still be registered at the local AIC as Legal Representative of the company. It will be the companies responsibility to appoint a new Legal Representative and register the change at the AIC. The employee can report to the AIC that they have left the Legal Representative role, and should monitor the company to ensure it updates the official record accordingly.
Many Legal Representatives are overseas individuals in management positions in the corporate shareholders of the China company. These individuals will likely not have a valid China Employment Agreement with the China company which they serve as Legal Representative. In this case, an email message or letter reporting the individual’s decision to end the Legal Representative role should be sufficient to terminate the position.
Interestingly, China law would likely allow such an individual to bring a labor arbitration claim against the China company seeking unpaid salary for the time in which the individual served as Legal Representative. Even better, under China law, such time serving on behalf of the company without a formal China Employment Agreement will be subject to double salary paid to the employee. The trick would be determining the appropriate salary for the individual given the circumstances.