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Summary: Company chops are the official seal for a company in China and are required for a range of regulatory and legal purposes.
Company chops are crucially important in China. They’re official seals that authenticate documents and business deals; without them, companies can’t do much. Recent news stories about executives absconding with chops illustrate how much power a chop holder can wield. In this article, we’ll look into what chops are, what they’re used for, and alternatives for modern business.
What are China Company Chops?
Company chops are carved blocks that are the official seals of enterprises in China. They’re used for all official documents and business transactions, and their holders have the power to sign contracts, make financial transactions, open bank accounts, hire or fire executives, and much more. These seals are carved with the company’s name as it appears on its official business registration and sometimes its logo.
The company chop is known as a yìn jiàn or yìn zhāng in Chinese, with the word yìn meaning the printed seal left behind by these stamps. Chops are dipped into a red paste called zhū shā made from ink or cinnabar. They are then pressed onto documents to leave behind bright red impressions that convey the authority of the holder to represent their company.
The history of these seals is a long one. Archaeologists have actually excavated chops that were in use 3000 years ago during the Shang Dynasty. Since that time they have become widespread across all of China.
These days, chops are needed by all companies that are registered in China. The holder of the chop wields the power to make business happen, and without it, important deals simply can’t go through.
Why are China Company Chops important?
Most foreigners might not think that chops are still extensively used or needed for official business in China. After all, chops recall signet rings and wax seals, which have long disappeared from use in all but a symbolic capacity. But they’d be wrong.
It can be used in addition to or, often, in place of a handwritten signature. This gives incredible power to the holder of the chop, who literally holds the power of the company in their hands. Company chops can be used to stamp introductory letters, certificates, and other official documents issued by the company. They can also be used to seal legally binding documents like business contracts, bank account contracts, large financial transactions, and even make official changes to the structure or ownership of the company.
How to Get a Company Chop in China?
To create a chop, a company has to design, produce, and register it with the Administration of Industry and Commerce and the Public Security Bureau. Only once the chop is approved can a company officially begin to do business.
Without its chop, a Chinese business can’t do any of these activities and can potentially be ground to a halt. In some cases, disputes over possession of the chop can lead to entrenched legal battles. If the chop can’t be recovered, a company may have to reincorporate and create a new chop in a process that can stall business for months.
What are the different types of China Company Chops?
Different types of chops are distinguished according to their function in a company’s affairs. These include:
Main Company Chop
This chop is the seal of authority of the company and must include its full name in Chinese. The company must use it on contracts, when opening bank accounts, and many other official documents.Electronic Chop
Modern companies need to be able to sign deals and finalize contracts remotely and with other firms that could be located around the world. Clearly, the ancient chop system isn’t convenient or accessible enough for all modern business needs. Therefore, the Chinese government updated its electronic signature law in 2015 to include digital chops. These digital seals are legally binding and can only be used by a single representative. They also add security to deals by providing encryption and digital authentication to the seals.Contract Chop
Many firms opt to create a special chop only for signing contracts either internally (like with its employees) or with other businesses. The contract chop can be used in place of the main company chop in these designated instances.Customs Chop
All companies that practice international trade are also required to have customs chops that are used on import and export declarations as part of their global trade compliance.Finance Chop
All companies are similarly required to possess financial chops that can be used in place of or together with their company chops. These seals are used for opening bank accounts and authenticating bank transactions, tax filings, and compliance documents.Invoice Chop
Another mandatory chop, the invoice chop, is used on all tax receipts and invoices issued by a company.Legal Representative Chop
A company can create a sole legal representative to enter into deals on its behalf. That person is granted a legal representative chop, which must be duly registered.
Chops in China
Chinese businesses continue the tradition of sealing business transactions and deals with either physical or electronic chops. These seals are like the signatures of the companies they represent and are legally binding. For that reason, they’re not only important, they’re a crucial requirement of doing business in China.
FAQ
The short answer is yes. If an international company wants to open a subsidiary in China, it needs to officially register and create a company chop to be able to engage in business activities.
Since chops are so important, an investigation will have to be made into the situation. If the seal is determined to be truly lost, the company can apply to register a new chop through a long, time-consuming process.
Andrew (Drew) joined the Remote People team in 2020 and is currently Director, Regulatory Affairs. For the past 13 years, he has been a trusted advisor to C-Suite executives and government ministers on international compliance and regulatory issues. Drew holds a law degree from the University of Otago, a PhD from the University of Sydney, and is an enrolled Barrister and Solicitor of the High Court of New Zealand.
