What should legal representative pay attention to when starting a company?

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According to the law of our country, the legal representative of a company refers to the main person in charge who exercises civil rights and performs civil obligations on behalf of a legal person according to law and acts in the name of the company. Legal representative is the most important part of corporate governance structure. In a sense, becoming the legal representative of the company means controlling the core power of the company. However, while exercising power, the legal representative must also bear corresponding legal responsibilities. This paper intends to make a brief analysis of the possible legal responsibilities of the legal representative of the company from three aspects: civil, criminal and administrative, and puts forward some suggestions on the prevention of legal risks of the legal representative in combination with China's judicial practice.

1. The legal representative of the company is the chairman or general manager of the company.

According to Article 13 of the Company Law (revised in 2005), "The legal representative of the company shall be the chairman, executive director or manager in accordance with the articles of association, and shall be registered according to law. If the legal representative of the company changes, it shall register the change. "

According to the above provisions, to become the legal representative of the company, two conditions must be met. First, he holds core management positions such as chairman, general manager or executive director in the company; Second, industrial and commercial registration or change registration must be handled according to law.

Second, as the legal representative of the possible legal risks

Generally speaking, the acts carried out by the legal representative in the name of the company in accordance with laws, regulations and the articles of association are regarded as the acts of the company, and the company shall bear relevant legal responsibilities. In other words, under normal circumstances, the legal representative will not bear legal responsibility for his performance of duties on behalf of the company.

However, in some special circumstances, due to the special status and responsibilities of the legal representative, under certain conditions, the legal representative may bear corresponding civil, administrative or criminal responsibilities for the company's behavior. However, this situation is often caused by the legal representative's violation of laws, regulations and articles of association, or the violation of loyalty and diligence obligations.

1, the legal representative may bear civil liability.

(1) The duties of the legal representative shall be undertaken by the company.

Article 43 of the General Principles of Civil Law stipulates: "An enterprise as a legal person shall bear civil liability for the business activities of its legal representative and other staff members."

It is generally understood that the business activities of the legal representative of the company in the name of the company belong to the performance of duties, and the relevant civil liabilities arising therefrom shall be borne by the company, and the legal representative will not bear civil liabilities externally because of his duties.

Moreover, if the legal representative acts beyond his authority, it constitutes an agency by estoppel, that is, the third party has every reason to believe that the other party dealing with him is acting on behalf of the legal person, and the legal person should also be liable to the third party for the legal representative's behavior.

(2) If the legal representative intentionally or negligently causes losses to the company, the legal representative may need to compensate for the losses.

According to Article 150 of the Company Law: "Directors, supervisors and senior managers who violate laws, administrative regulations or the provisions of the Articles of Association when performing their duties shall be liable for compensation."

Therefore, if the legal representative violates laws, administrative regulations or the Articles of Association, even if the legal representative is performing the duties of the company, the company has the right to demand the legal representative to compensate for the losses after assuming the relevant responsibilities.

(3) Legal representatives such as directors, supervisors and senior managers may be liable to the company for acts that harm the interests of the company.

Article 148 of the Company Law stipulates: "Directors, supervisors and senior management personnel shall abide by laws, administrative regulations and the articles of association of the company, and have the duty of loyalty and diligence to the company. Directors, supervisors and senior management personnel shall not use their powers to accept bribes or other illegal income, and shall not encroach on the company's property. "

According to Article 21 (1) and Paragraph 2 of Article 149 of the Company Law, if the actual controllers, directors, supervisors and senior managers of the company violate the duty of loyalty and diligence and damage the interests of the company, they shall be liable for damages.

If the legal representative commits the above acts and causes losses to the company, he will of course be liable for compensation to the company.

In addition, if other directors, supervisors and senior managers commit illegal or infringing acts and damage the interests of the company, in addition to the responsibilities of the relevant personnel who commit the above acts, the legal representative of the company who participates in the decision-making of related transactions or signs relevant documents is likely to be recognized as the same infringing act as the relevant infringer, and should also be liable for compensation to the company, unless the legal representative has clearly raised an objection when voting on the relevant resolutions of the board of directors and recorded it in the minutes of the meeting, or the legal representative is right.

2, the legal representative may bear the administrative responsibility

Article 49 of the General Principles of the Civil Law stipulates: "In any of the following circumstances, an enterprise as a legal person may, in addition to investigating the liability of the legal person, impose administrative sanctions and fines on its legal representative. If the case constitutes a crime, criminal responsibility shall be investigated according to law: (1) engaging in illegal business beyond the business scope approved and registered by the registration authority; (2) Concealing the real situation from the registration authority or the tax authority or practicing fraud; (3) Evading funds or hiding property to avoid debts; (4) Disposing of property without authorization after dissolution, cancellation or bankruptcy; (5) Failing to apply for registration and announcement in time at the time of alteration or termination, thus causing great losses to the interested parties; (6) engaging in other activities prohibited by law that harm the national interests or social public interests. "

According to the above provisions and other relevant laws and regulations, in some cases, the legal representative may bear administrative responsibility for the company's illegal acts. Unless, the legal representative can prove that he is ignorant of the company's behavior and there is no subjective fault or dereliction of duty.

3, the legal representative may bear the criminal responsibility

Generally speaking, the company should bear criminal responsibility for its criminal acts, and the legal representative should not bear criminal responsibility for it. However, in some crimes stipulated in China's criminal law, in addition to punishing the unit, it is also possible to investigate the criminal responsibility of "the directly responsible person in charge and other directly responsible personnel". For example, the crime of producing and selling fake and inferior products, the crime of tax evasion, the crime of copyright infringement, and the crime of illegal business operation.

Although the specific scope of the above-mentioned "directly responsible person in charge" is not clearly defined by law, judicial practice usually recognizes that the legal representative is the "directly responsible person in charge" of the unit, and accordingly recognizes that the legal representative should also bear criminal responsibility for the company's behavior.

4. Compulsory measures can be taken against the legal representative.

When the company enters bankruptcy proceedings, is applied for compulsory execution or fails to pay taxes, under certain circumstances, the judicial administrative organ has the right to take corresponding compulsory measures against the legal representative.

(1) If the company has unresolved civil litigation or fails to perform its obligations stipulated in legal documents, the judicial organ may take compulsory measures such as restricting the legal representative from leaving the country.

Article 255 of the new Civil Procedure Law stipulates that "if the person subjected to execution fails to perform the obligations specified in the legal documents, the people's court may take or notify the relevant units to assist in taking exit restriction measures, record them in the credit information system, and publish the information of non-performance of obligations through the media and other measures prescribed by law."

Article 37 of the Supreme People's Court's Interpretation on Several Issues Concerning the Application of the Execution Procedure of the Civil Procedure Law of People's Republic of China (PRC) stipulates: "The person subjected to execution is a unit, and the legal representative, principal responsible person or person directly responsible who affects the performance of debts may be restricted from leaving the country."

According to the above provisions, when the company is applied for compulsory execution because it fails to fulfill its obligations specified in legal documents, the people's court may take compulsory measures to restrict the legal representative from leaving the country.

In addition, according to Article 12 of the current Law on the Administration of Citizens' Exit and Entry, "in any of the following circumstances, it shall not be approved to leave the country: ... (2) The people's court informs that there are unresolved civil cases that cannot leave the country; ..... ",in practice, if the company has unresolved civil cases, the court can also take compulsory measures to restrict the legal representative from leaving the country.

(2) After the company enters bankruptcy proceedings, the legal representative shall not leave the domicile without authorization.

In the bankruptcy proceedings of an enterprise, the legal representative shall not leave his domicile without the permission of the people's court.

In addition, in bankruptcy proceedings, the legal representative should also undertake corresponding obligations, such as properly keeping the property, seals, account books, documents and other materials in his possession and management; Work in accordance with the requirements of the people's courts and managers, and truthfully answer inquiries; Attend creditors' meetings as nonvoting delegates and truthfully answer creditors' inquiries; No new directors, supervisors or senior managers of other enterprises may be appointed.

(3) If the company fails to pay taxes, the tax authorities may restrict the legal representative from leaving the country.

According to the provisions of Article 44 of the Law on the Administration of Tax Collection, "A taxpayer or his legal representative who is in arrears of tax payment needs to leave the country shall settle the tax payable, late payment fee or provide guarantee to the tax authorities before leaving the country. If the taxes and late fees are not settled and the guarantee is not provided, the tax authorities may notify the exit administration authorities to prevent them from leaving the country. "

Therefore, if the company does not pay taxes and late fees and does not provide guarantees, it may restrict the legal representative from leaving the country.

Three, the legal representative of the company how to prevent legal risks

1. Add relevant exemption clauses in the shareholders' agreement, joint venture contract and articles of association to prevent risks.

There is "TheBusinessJudgmentRule" in the traditional company law theory, that is, if the directors and other senior managers of the company perform their duty of care and obtain reasonable information in good faith when making business judgment and decision, even if the decision is wrong, the senior managers can be exempted from legal responsibility.

However, China's company law does not clearly stipulate "business judgment rules", and there are also disputes in judicial practice. In view of this situation, China Company may consider adding the following similar agreements in its articles of association to reduce the legal risk of its legal representative:

The directors, chairman and legal representative of the company shall not bear personal legal responsibility for the acts within the scope of duties stipulated by the board of directors and the articles of association, except that their acts constitute graft, serious dereliction of duty, intentional dereliction of duty or intentional damage to the interests of the company.

According to the above agreement, if there is any claim or responsibility against the directors, chairman and legal representative related to the company's operation, the company shall bear all the responsibilities, but the behavior leading to the claim or responsibility shall not constitute graft, serious dereliction of duty, intentional dereliction of duty or intentional damage to the company's interests. If the director, chairman and legal representative suffer losses due to the above claims, the company shall compensate them for their losses and their reasonable attorney fees and other expenses and expenses. "

2. Avoid risks through collective decision-making procedures, put forward clear objections to violations of laws, administrative regulations or the company's articles of association and record them in relevant meeting minutes.

According to the relevant theories of China's company law, the major business activities of the company should be decided by the shareholders' meeting or the board of directors. Unless it violates the provisions of laws, regulations or the articles of association, it shall be regarded as the company's decision, and the legal representative shall not be liable.

Therefore, when the chairman, executive director or manager of the company is the legal representative, it is best for the shareholders' meeting or the board of directors to make decisions on the daily business activities of the company according to the provisions of the articles of association; At the same time, for matters that violate laws, administrative regulations or the articles of association, objections should also be clearly raised and recorded in the corresponding meeting minutes to avoid possible legal risks.

3. It is suggested that the company establish a professional liability risk insurance system.

On June 7th, 2002, 65438, China Securities Regulatory Commission issued Article 39 of the Guidelines on Governance of Listed Companies: "With the approval of the shareholders' meeting, a listed company may purchase liability insurance for its directors. However, the liabilities of directors due to violation of laws, regulations and articles of association are excluded. "

At present, major insurance companies in China have executive liability risk insurance for senior managers of enterprises. When the directors need to bear the corresponding responsibilities due to their duties, the insurance company can compensate this part to avoid the personal property risks of the directors. The company may consider establishing a professional liability insurance system, and the company will purchase liability insurance for the legal representative and directors to minimize the legal risk of being the legal representative.

The above is only a brief description of the legal risks that the legal representative of the company may bear and the basic principles of legal risk prevention. In judicial practice, how to design the legal risk prevention mechanism of legal representative needs to be carefully considered in combination with specific facts. At the same time, any design of risk prevention system can not let the legal representative who intentionally violates the law and maliciously damages the interests of the company escape legal sanctions. The key for the legal representative of a company to avoid legal risks is to act in accordance with the provisions of the law and the articles of association and to protect the interests of the company dutifully.