Do Foreign Companies Need a Chinese Legal Representative to Register a Subsidiary?

Multinational companies interested in entering China often ask whether they must appoint a Chinese legal representative to register a subsidiary. In short, Chinese law requires that every company must have a "legal representative," but most industries do not mandate that the representative be a Chinese national.

Foreign-invested enterprises (WFOEs or joint ventures) may appoint either a foreign or Chinese national as their legal representative under the law, with the exception of special regulatory industries like civil aviation, which require a Chinese national. According to the latest "Company Law," this guide explains the requirements for establishing subsidiaries, covering WFOEs, joint ventures, representative offices, and other types of entities, while also providing authoritative establishment guidance for businesses, taking into account industry-specific exceptions.

Understanding the Legal Representative in China

In the Chinese legal system, the legal representative is a key role responsible for exercising the company's power and bearing legal responsibility. Every company registered in China (including foreign-invested enterprises) must appoint a legal representative, whose name appears on the business license. The main duties of the legal representative include:

• Signing contracts and important documents: The legal representative can sign contracts and handle legal matters on behalf of the company.
• Asset and compliance management: They are responsible for maintaining the company's asset security, submitting financial and compliance reports to regulatory authorities, and fulfilling various legal obligations.
• External communication: The legal representative's signature usually carries legal effect when cooperating with government departments or third parties.

Since many formal documents in China require the company’s stamp and the legal representative's signature, this position enjoys broad authority but also bears corresponding risks. If the company violates the law severely, the legal representative may face restrictions on leaving the country or other legal penalties. Additionally, if the legal representative refuses to cooperate with changes, it can be difficult for the company to quickly replace them.

According to the latest revision of the "Company Law of China" (effective in 2024), the legal representative can be a director, manager, or other senior executive as specified in the company’s articles of association, and there is no mandatory requirement for the legal representative to have Chinese nationality or live in China. Therefore, most industries allow foreign nationals to serve as the legal representative. However, for practical reasons (such as opening bank accounts or signing administrative documents), many companies still prefer to appoint someone who can handle matters locally in China, in order to increase efficiency.

In short, the "Chinese legal representative" refers to the role in a company registered in China and does not necessarily require the individual to be a Chinese national, but they must fulfill the core legal and administrative responsibilities of the company operating in China.

Industry-Specific Requirements and Exceptions

In most cases, foreign companies do not need to appoint a Chinese national as the legal representative when setting up a subsidiary in China. However, for certain specific industries or sectors, Chinese laws and regulations, including the "Special Administrative Measures for Foreign Investment Access (Negative List)," have special provisions:

1. Aviation Industry:

Public air transport enterprises require Chinese ownership (foreign investment cannot exceed 25%), and the legal representative must be a Chinese national.

General aviation companies also have similar regulations requiring the legal representative to be a Chinese citizen.

These requirements are primarily due to national security and industry policy considerations and are relatively rare but strict exceptions.

2. Telecommunications and Internet Services

Basic telecom services generally must be controlled by Chinese investors, and the foreign ownership limit for value-added telecom services (with some exceptions) is 50%.

Although the regulations do not explicitly state that the "legal representative must be a Chinese national," in practice, when the company is Chinese-controlled, it is often a Chinese executive who serves as the legal representative.

3. Financial Services (Securities, Insurance, Banking, etc.)

In the past, joint ventures with Chinese partners were required, and there were many restrictions on management and equity proportions; nowadays, the sector is gradually opening up, allowing foreign investment to control or even fully own companies, but there may still be "suitability" requirements for executives.

It is advised to stay updated on the latest policy adjustments to determine if the legal representative needs to meet additional conditions.

4. Media, Publishing, Education, and Other Sensitive Industries

There are usually strict restrictions or bans on foreign investment, and certain fields can only exist in a Chinese-controlled form.

In these industries, foreign investors are generally not allowed to serve as the highest-ranking officer or legal representative and must comply with industry regulatory requirements.

For most foreign-invested enterprises (including wholly foreign-owned enterprises and joint ventures), the law does not typically mandate that the legal representative must be a Chinese national. As long as it does not involve special controlled industries, foreign nationals can legally serve as the legal representative of a Chinese subsidiary. In practice, considerations should be made based on industry regulations, business needs, and risk management.

If you have any questions about registering a company in China, appointing a legal representative, or other foreign investment matters, feel free to consult Hengxin Huiying (hengxinhuiying.com), where we specialize in providing comprehensive support and services to foreign enterprises registering in China.