Shanghai A foreign company is engaged in the production of car components, with its headquarters in Italy. In order to facilitate the daily operation and management of the company, the Italian headquarters appointed a Chinese general manager as the legal representative of A foreign company in early 2021.

In March 2023, due to a fierce conflict between the Italian headquarters and the general manager of A foreign company, the general manager subsequently refused to communicate with the headquarters, resulting in the headquarters losing control of A foreign company.

The Italian headquarters has decided to change the legal representative of A foreign company, but due to the fact that all important certificates and assets such as business licenses and seals of A foreign company are kept by the general manager alone, the headquarters is unable to apply for a new business license and seals, and cannot provide the necessary application materials for changing the legal representative of A foreign company according to the requirements of the local Industrial and Commercial Bureau, resulting in an awkward " stalemate".

And if the headquarters files a lawsuit with a Chinese court, will the court file the case? When will the lengthy first and second instance procedures end? Can enforcement be enforced to solve the problem? How can the company apply for compensation for the losses during this period? These issues are difficult for headquarters to control and are also full of uncertainty.

Dongjin Remind:

Although shareholders, as the highest authority of the company, can change the legal representative of the company, in practical operations, if the original legal representative does not cooperate and important assets such as the business license and seals of the company are controlled by the original legal representative, it is difficult for shareholders to directly apply to the Industrial and Commercial Bureau for changing the legal representative.

In order to avoid the above "stalemate", Dongjin suggests that the company should not hand over its business license and seals to the legal representative alone for safekeeping. It can be arranged to be separately kept by legal and financial departments, or entrusted to a third-party professional service institution trusted by the headquarters for safekeeping.

If the company has any related questions, please feel free to contact Dongjin for consultation.

Mike Chang

Partner

mikechang@shanghaiinvest.com