01
Management is built as a system of powers
For a Chinese LLC, it is not enough to copy the standard articles of association. It is necessary to agree on Company Law, articles of association, participant decisions or shareholders’ agreement, approval matrix, legal representative powers, seal control and banking rights. The foreign parent company must decide in advance which actions are available to the local team and which require group approval.
Determine the capital structure, appoint key bodies and resolve fundamental issues.
Organizes activities, implements decisions of participants and controls management.
Conducts daily work within the limits of the law, charter and delegated authority.
Supervisor, board audit committee and internal procedures check the actions of management.
03
Board and manager: strategy versus daily operations
The Board is responsible for the implementation of member decisions, the business plan, internal structure, proposals for capital and major corporate changes, and the appointment of a manager and key executives. In a small LLC, a single director may act instead of a collegiate board if the applicable model allows it.
- Composition
- Determined by Company Law and Articles of Association; for a small LLC one director is possible
- Deadline
- The term of office of the director according to the charter is no more than three years in one term, with the possibility of re-election
- Manager
- Powers are determined by the charter or board decision; manager reports to the board
- 300+ employees
- The requirement for the participation of an employee representative on the board is checked if appropriate representation is not provided through the supervisory body
04
Legal representative - outer contour of authority
Legal representative is a director or manager who, in accordance with the charter, conducts the affairs of the company on its behalf. His name is indicated in the business license and registry. Internal limitation of powers is important for responsibility within the group, but does not always protect the company in external relations with a bona fide counterparty.
The legal representative, the holder of the company chop and the user of the banking token can be different persons. If these roles are not linked by a single control matrix, formal corporate restrictions can easily diverge from the actual ability to sign a document or make a payment.
- Purpose
- Articles of Association plus decision of the competent authority and registration filing
- Replacement
- Solution, updating the register, business license, bank, taxes, licenses and powers of attorney
- Resignation
- The departure of a director or manager, who is a legal representative, requires the appointment of a new person within a specified period of time
- Control
- Contract limits, dual approval, storage of seals and payment rights
05
Supervisor or audit committee
The general model provides for a supervisory board or supervisor, but Company Law allows, under certain conditions, to place the audit committee within the board and not create a separate supervisory body. For a small LLC, members may agree to the absence of a supervisor if legal requirements are met.
- Supervisor
- Reviews the finances and actions of directors and senior management
- Audit committee
- Can perform supervisory board functions within the board of directors
- Independence
- You cannot mechanically combine a control role with a controlled executive function.
- Practice
- Inspection plan, access to documents, conflict procedure and escalation channel to the participant
06
Loyalty, discretion and conflict of interest
Directors, supervisors and senior managers have duties of loyalty and discretion. They must avoid taking advantage of positions for personal gain, disclosing related transactions, misappropriating corporate opportunities, or competing with the company without proper approval.
- Duty of loyalty
- The company's interest is higher than the personal benefit of the official
- Duty of diligence
- A reasonable degree of attention typically expected from a manager in a similar position
- Related-party transaction
- Disclosure of communication and approval by the competent authority according to the established procedure
- Third parties
- In case of intent or gross negligence, in some cases personal liability to the counterparty is possible
- Controlling Member
- Influence should not be used to give instructions that cause harm to the company or other participants.
The agenda, materials for the meeting, disclosure of the conflict, discussion of alternatives and a reasoned decision are no less important than the final signature.
07
The Board controls the reality of capital
The subscribed capital of a new LLC is generally paid in over five years. The Board must verify deposits; in case of delay, the company sends a demand to the participant. The reform also strengthened the mechanisms for early deposit of capital in case of risk of insolvency and liability for unreliable deposits.
- Capital schedule
- Fixed in the charter and verified with the real budget of the company
- Checking your deposit
- The Board controls the amount, term, form and documents of the transfer of property
- Overdue
- Formal procedure for claiming and possible loss of rights for the unintroduced portion
- Transfer of shares
- The status of the deposit and the distribution of responsibility for uncontributed capital are checked
- Change in capital
- Corporate decision, creditor protection and registration actions
08
Stamps, signatures and bank must match governance
Company chop is of great practical importance for the actions of a Chinese company. Additionally, finance chop, legal representative chop, invoice chop and other seals are used. Their storage, use and logging must be formally distributed; banking tokens and Internet banking rights are controlled separately.
General corporate outline of contracts and documents; storage with an independent responsible person.
Financial and fapiao processes; should not remain uncontrolled with one payment initiator.
Use only in accordance with the approved procedure and with verification of the base.
Maker/checker separation, limits, separate devices and periodic review of users.
09
Beneficiaries and corporate transparency
From November 1, 2024, a system for submitting information about beneficial owners has been in effect. The company determines applicability, identifies individuals based on ownership, control and benefit criteria, submits information through the registration system and updates it as changes occur. Separately, the bank conducts its own KYC/AML check.
- Corporate registry
- Data about the company, participants, bodies and registered changes
- Beneficial owners
- Identification of final individuals according to current criteria and submission of information
- Foreign investment reporting
- Provided information on foreign investment and its changes
- Bank KYC
- Ownership structure, control, source of funds, transactions and supporting documents
- Annual reporting
- Market entity annual reporting and other applicable disclosures
10
Minimum set of corporate controls
- 01
Charter, shareholder agreement and list of reserved matters without contradictions.
- 02
Board, manager, supervisor or audit committee regulations and meeting calendar.
- 03
Authority Matrix for Contracts, Employment, Procurement, Taxes and Disputes.
- 04
Policy of seals, powers of attorney, electronic signatures and bank tokens.
- 05
Register of members, directors, UBOs, capital contributions and related persons.
- 06
Templates for agendas, decisions, protocols, conflict disclosures and related-party approvals.
- 07
Annual compliance calendar: registrations, reporting, licenses, taxes and audits.