What Are The Risks Of Being Legal Representative?

In today’s video, we will explain what the legal risks are for being the legal representative of a company, in three perspectives, civil, criminal and administrative.

For civil liability, legal representatives may be held accountable for civil damages caused by their actions, leading to harm to the company. In such cases, the company has the right to seek compensation from the legal representative. Additionally, if shareholders exploit the corporate identity to evade debts, resulting in substantial harm to creditors’ interests, legal representatives bear joint liability with the company.

Furthermore, if the legal representative is also a shareholder and fails to establish the clear separation of personal and corporate assets, they can be held jointly liable for the company’s debts. More importantly, if the company is unable to pay off debts after losing a lawsuit, the legal representative will be put on the blacklist for extravagant spending, which means he will not be able to buy a plane ticket, live in a hotel with any star rating, and apply for a bank loan.

For administrative responsibility, violations such as engaging in illegal business activities beyond the scope of operations, concealing pertinent information, and misappropriating funds can result in fines imposed on legal representatives by judicial authorities. The Regulations on the Administration of Company Registration stipulate penalties for acts like asset concealment, record falsification, and improper distribution of assets during liquidation, directly applicable to legal representatives and other responsible individuals. In cases of debt defaults or tax evasion, administrative authorities may impose measures restricting the departure of legal representatives.

According to China’s Criminal Law, legal representatives who hold senior executive positions within a company may be subject to criminal penalties if the company violates criminal laws. However, it’s important to note that not all offenses committed by a company automatically result in criminal liability for the legal representative. The legal representative will only be considered directly responsible if the offense falls within their official duties and they were aware of its occurrence. Crimes for which a legal representative may be convicted include serious labor safety accidents, accidents related to fire safety responsibilities, bribery, and false bankruptcy.