Surprising Fact about China Overtime Salary on Public Holidays

Next week brings Chinese New Year, also known as Spring Festival, which is the most important holiday in Chinese cultural tradition. During this holiday, large cities such as Beijing and Shanghai empty, with people going back to small cities and villages across China to spend the holiday with family. The holiday brings 7 official public days off work; however, many industries require employees to remain on the job over the holiday period.

A client recently contacted our Shanghai Law office, and explained that due to special circumstances this year, certain employees will need to remain working on an urgent ongoing project through the holiday. As this client has several branch offices in different cities around China, and the employees to remain working over the holiday are spread through these branch offices, calculation of required overtime compensation is not straightforward. What’s more, a few of these employees are registered under China’s flexible working hours category adding extra confusion as to what the legal requirements for compensation for work over the holiday will be.

Calculating overtime wages due is an area that is affected by both national and provincial level law and regulations. Generally, an employee which is required to work over a public holiday is entitled to overtime wages of at least three times the employee’s standard daily or hourly wage.

For employees under a flexible working hours scheme, which must be registered as such with the local Labor Bureau we must look at local regulations from the Labor Bureau and Social Security Bureau to make a determination as to whether they are entitled to the 300% salary rate.

Let’s take Beijing and Shanghai for example, in Shanghai a company shall pay standard overtime wages (300%) each employee for time spent working over the public holiday, however in Beijing, employees on a flexible working hours system are not entitled to the 300% percent compensation (though the company may still pay at this level if desired).

Confirming local rules and regulations is an important part of many areas of China legal practice. Such rules and regulations often vary widely from province to province and city to city. The overarching national laws are not always the best place to seek final answers. A China lawyer will conduct all relevant local research to ensure you are compliance with both national and local laws, policies and regulations.

Published by Bonnie Zhang on January 19th, 2017 tagged Uncategorized | Comment now »

Terminating Yourself as Legal Representative of a China Company

Normally, a Legal Representative for a China company is appointed or removed by an action of the shareholder of the company. But what if a Legal Representative simply wants to leave the role unilaterally? Are there actions the Legal Representative may take to legally terminate the position and its attendant responsibilities? This may be desirable if a Legal Representative notices that the company’s actions are against Chinese law, but where the Legal Representative is not able to affect a change in the operations or management of the company. In such a case, the best option for the Legal Representative will be to get out as fast as possible and avoid potential liabilities.

A Legal Representative must be a Director of the company, or its General Manager by law. Directors and General Managers are both employees of a company, and should have a China Employment Agreement setting forth responsibilities of both parties. The Employment Agreement will outline steps for termination of the employment, and the employment will also be subject to provisions of China law as regards Labor Contract termination.

A Legal Representative wanting to end the role should approach the matter as a typical employee ending an Employment Agreement. Notice would be given to the company, and the individual may leave the employment. Of course, the employee will still be registered at the local AIC as Legal Representative of the company. It will be the companies responsibility to appoint a new Legal Representative and register the change at the AIC. The employee can report to the AIC that they have left the Legal Representative role, and should monitor the company to ensure it updates the official record accordingly.

Many Legal Representatives are overseas individuals in management positions in the corporate shareholders of the China company. These individuals will likely not have a valid China Employment Agreement with the China company which they serve as Legal Representative. In this case, an email message or letter reporting the individual’s decision to end the Legal Representative role should be sufficient to terminate the position.

Interestingly, China law would likely allow such an individual to bring a labor arbitration claim against the China company seeking unpaid salary for the time in which the individual served as Legal Representative. Even better, under China law, such time serving on behalf of the company without a formal China Employment Agreement will be subject to double salary paid to the employee. The trick would be determining the appropriate salary for the individual given the circumstances.

Published by Jacob Blacklock on January 18th, 2017 tagged Uncategorized | Comment now »

Operating a China Trading Company

China’s annual foreign trade data was released on January 13th. The data shows that although international financial markets have been less stable due to international political events, the total value of imported and exported goods in the year of 2016 was RMB 24.33 trillion. The increase through the final quarter of 2016 in particular indicated healthy foreign trade going into 2017.

Several of our clients are involved in foreign trading businesses, and large numbers of clients and potential clients, including several start-ups, are planning to operate in the same area. In China, in order to operate import and/or export businesses, enterprises should include the types of items to be imported and exported within their approved “Business Scope” as listed in the Articles of Associations and within the company’s their Business Licenses. It is not enough for a company to operate import & export business with a Business Scope covering “import and export.” The company must also acquire import & export rights from a few different authorities in China, requiring a series of certificates and approvals.

A company seeking official approval to engage in import and export business is required to obtain approvals from the Commerce Bureau, the State Tax Bureau, Customs, the Public Security Bureau, the company’s own Bank, the Inspection and Quarantine Bureau, among others. These procedures can often be complicated and onerous for company personnel to handle, as sometimes professional questions as to legal and taxation issues will be involved.

The ability to conduct import and export will benefit a foreign trade company immensely; most notably by removing the company’s need to reply on import or export intermediaries and associated costs. Additionally, the company will gain the full benefit of VAT rebate upon export of products. The opportunity to communicate directly with foreign purchasers will expose the company to additional avenues for business.

Any China trading company seeking to engage in import and export needs to be aware of all the formalities required to obtain approvals to operate in this business area. A local China lawyer can assist with identifying and obtaining all required approvals.

Published by Crys Zheng on January 17th, 2017 tagged Uncategorized | Comment now »

How Cancel an Adoption in China

Many people know that the adopted children and adopters shall meet the specific requirements of the law, such as age, health condition, financial conditions which related to child-rearing. Here, I just want to remind you of the formality issue. Many adoptions were affirmed as invalid because the adoptions were not registered properly in the civil affairs department.

As of the date of establishment of the adoption, the legal provisions governing the relationship between parents and children shall apply to the rights and duties in the relationship between adoptive parents and adopted children; the legal provisions governing the relationship between children and close relatives of their parents shall apply to the rights and duties in the relationship between adopted children and close relatives of the adoptive parents. The rights and duties in the relationship between an adopted child and his or her parents and other close relatives shall terminate with the establishment of the adoptive relationship.

The adoption could be terminated by settlement or lawsuit. Generally, no adoption could be terminated before the adopted child comes of age. And under the circumstances that the adoption is terminated by settlement, it shall be registered in the civil affairs department.

Actually, I believe people care more about the rights and duties of the adopted children and adopters than the termination itself. In China, influenced by the traditional cultures, many people choose to adopt a child in order to support themselves in their old ages, therefore, it is much more important for Chinese people. There are circumstances the adopters could get financial support from the adult adopted children or their parents:

1.  After the termination of adoption, an adult adopted child who has been reared by the adopters shall provide an amount of money to support the adopters who has no economic resource.

2.  If the adoption is terminated on account of the maltreatment or desertion of the adopters by the grown-up adopted child, the adopters may demand compensations from the adopted child for the living and education expenses paid during the period of adoption.

3.  If the adoption is requested by the parents of the adopted child,  the adopters may demand an appropriate compensation from the parents for the living and education expenses paid during the period of adoption, except if the termination is on account of the maltreatment or desertion of the adopted child by the adopters.

And for the adoption is affirmed invalid at the very first, the adopter is also entitled to demand the compensation from the adopted child for the living and education expenses paid during the period of adoption.

Published by Myra Kong on January 16th, 2017 tagged Uncategorized | Comment now »

Changes to Securing a Property Preservation Order in China Litigation

As a first step to imitating any China Litigation, our China lawyers will seek a property preservation order to freeze known assets of a defendant so they cannot be transferred or hidden. In past practice a Court will not accept such a property preservation application without proof of the specific property information of the other party, such as detailed bank account information. This situation has changed since the start of 2017.

According to a judicial interpretation issued by the People’s Supreme Court of China, a party applying for property preservation in litigation which for clear and definable reasons cannot provide specific information as to property to be preserved, but provides specific facts relating to such property; the court may duly issue a property preservation order.

If the facts provided by the applicant are sufficient, the court may perform inquiries as to the property to be preserved and take corresponding measures to seal up, distain, or freeze such property. The key question here is that even if exact details are not required, what kind of specific facts will be sufficient to the give the court the information it needs to clearly identify relevant properties and issue the preservation order.

Published by Bonnie Zhang on January 12th, 2017 tagged Uncategorized | Comment now »

Freezing a China Bank Account with a USA Court Order. Good Luck With That

We’ve had some USA companies come to us with a USA judgement ordering an injunction or freeze over a China bank account of a Chinese company the USA client is in a dispute with. When we see these cases, we always have to tell the client we can’t help. The USA court order is useless over Chinese banks.

The Law of the People’s Republic of China on Commercial Banks (the Banking Law, effective December 27, 2003), sets out the legal regime governing operations of banks in China.

Commercial banks shall be subject to the supervision of the banking regulatory organ of the State Council according to law, unless otherwise the law prescribes that the relevant business thereof shall be subject to the supervision of any other regulatory department or organ, the provisions shall prevail.

Commercial banks shall follow the principles of voluntary deposit and free withdrawal, paying interest to depositors and maintaining confidentiality for depositors in handling individual savings deposits.

Commercial banks have the right to refuse any entity or individual to inquire about, freeze or deduct individual savings accounts, unless it is otherwise prescribed by laws.

A commercial bank has the right to refuse any entity or individual’s inquiry about the account of an entity, unless it is otherwise prescribed by laws and administrative regulations; it also has the right to refuse any entity or individual’s request for freezing or deducting the account, unless otherwise as prescribed by laws.

Under China law, Chinese banks have the right to refuse any order by a foreign court to freeze assets. Chinese banks are subject to the supervision of the State Council, and under the regulatory agencies of the People’s Bank of China and the China Banking Regulatory Commission.

Regulations promulgated by the People’s Bank of China and the China Banking Regulatory Commission prohibit China banks from executing a foreign injunction or freeze on assets held in a Chinese bank.

Published by Jacob Blacklock on January 11th, 2017 tagged Uncategorized | Comment now »

Warning: You May Be a China Legal Representative for a Company You Have Never Heard Of

The firm has had a unique new client inquiry in the past week that I just had to share. The man who approached our firm, no facing official fines from the Administration of Industry and Commerce (AIC) for alleged illegal business operations, insists that he was never involved with the relevant company. However, this man is registered with the AIC as Director and Legal Representative of the company! The man insists his identify has been stolen and misappropriated to register a company he has never been involved with.

You may (or may not) be surprised to learn that this kind of thing isn’t exactly a rare phenomena. When a personal ID or passport is stolen in China, malicious individuals are able to use this documentation to establish a new company, or register the unknowing individual into official positions with the company within the official AIC database. This is attractive to those individuals who want to operate a company in illegal activities while avoiding personal civil and criminal liabilities which would apply to them if they served in official management positions with the company.

How does such a fraudulent registration get past the AIC and approved? AIC officials reviewing company registration applications are only required to review and confirm the sufficiency, and completeness of the documentation and confirm the application meets submission formalities. All this means is that the AIC must review the completeness and consistency of the documentation presented. It is the applicant’s responsibility to make a commitment that all documentation is authentic.

The document’s signatory is not required to appear in person, and documentation is not required to be notarized. What this means is that all it takes is a little practice in forging a signature to get in appropriate registrations approved by the AIC. In normal practice the reviewing officer will examine presented the copies of and ID card or passport and compare the signatures appearing on the application with those appearing on the ID document. If they match, the application will be approved.

In addition to those who deliberately steal ID documents and register fake names, the problem is exacerbated by common practices of many unprofessional agents which assist many Chinese individuals and some foreign companies in establishing a new China company quickly and cheaply. Many applicants seek agents rather than professional China lawyers for registering their business at a relatively low price in order to save cost; they are seemingly willing to sacrifice quality and trustworthy service for a lower price. Such agents routinely cut corners, and may go as far as using documentation from a prior client to quickly register a new company per the demands of a new paying customer.

Those establishing companies in China should keep the professional responsibility and ethics requirements of lawyers in mind. While there are many unscrupulous individuals in China, a China lawyer is bound by professional standards and duties to client, much the same as in most western countries.

So, what to do if you find yourself registered in such a role without your consent or knowledge? Call your China lawyer. You’ll have to take the AIC to court to prove your name and information was misused. If the action is successful, you will be able to have the AIC cancel your registration and avoid any fines. If possible, identify the party which presented your misappropriated information to the AIC and name them as co-defendants to the party.

Published by Crys Zheng on January 10th, 2017 tagged Uncategorized | Comment now »

Seven Tips for Drafting A China POA

All China POAs, regardless of whether the matter is simple or complicated, must meet a few basic requirements in order to be effective.

1. The duties delegated by the POA must be within the authority of the principle. Obvious right? You can’t you can’t sign a POA to authorize someone to act on behalf of Alibaba unless you are Jack Ma. This will also apply where the POA purports to give someone the ability to perform something illegal. The POA will not be effective

2. The duties delegated by the POA must be clear and proper. If the POA has not specified the matters entrusted clearly and properly, then it will be impossible to determine whether the action of the attorney is within the authority of the principal, and the POA will be invalid

3. The format of the POA shall be legal. Seems like a no brainer, except that there’s not exactly a clear definition of a “legal” format for a POA.

4. Introduction of the principal and designated “attorney”. The POA should state the full name, identification number, and other relevant identification information of both parties. It is important to note that if the principle is a company, the Legal Representative or other management personnel must be named in the POA.

5. List the matters of entrusted. This requirement is somewhat duplicative of the “clear and proper” requirement, but you get the idea that stating things clearly in the POA is very important, right? All matters that the principal requires the attorney to handle on behalf of him/her shall be listed in the POA to clarify the limit of the authority. Rather than stating an end goal the attorney is authorized to perform, such as sale of a house, it is recommended to clearly list each step of the expected transaction and clarify the attorney’s authority as to each.

6.Stipulate the term of POA. The POA should state a term within which the Attorney must complete the entrusted matters, or it can simply include an expiration date.

7.Execution of the principal. Obviously, the POA must be duly executed by the principal. If the principal is an individual, the POA must be signed by this individual. If the principal is a company, the POA must be signed by the Legal Representative or other person in authority of the company, and it must be affixed with the official seal of the company.

Talk to your China lawyer. Of course, if you need a POA, it’s best if you contact your China Lawyer to write something up. A lawyer will have more information about the detailed requirements and procedures of whatever it is you want the designated attorney to accomplish, so they may be better at listing out the acceptable actions of the attorney within the POA to ensure the document is written clearly.

Published by Myra Kong on January 9th, 2017 tagged Uncategorized | Comment now »

Does Your China Company Have a Seal Management System?

Our China Lawyers were helping one of our clients to formulate a Standard Contracts of Purchase and Sale, when the General Manager of the client asked if would be OK if he prepared some blank contracts with the company seal to give to some of the employees. He thought it will be convenient and flexible for their daily business and management.

WOW, BIG No No! This question leads to legal questions relating to the responsibility for management of the company’s seals and the legal risks for the company if the chops are misused.

Generally speaking, the company as a legal entity shall be responsible for managing all of its seals. The chops serve as the legal “signature” of the company and the company normally shall be the first legally “responsible person” for the documents that affixed with its chops.

Of course, the company may formulate some company rules or policies to assign the power of keeping and managing the chops to specific personnel of the company. However if such personnel misuse the company seal, or other person who is unauthorized uses the company seals to execute some financial contracts, defraud others of their money for his or her own possess or use, or even to conduct other criminal activities, the company will normally the first one to be investigated or be held responsible. In such case, the company has burden of proof to show that it was not involved and should not be responsible. However in practice it’s normally very hard to prove that and in most cases of seal misuse the company always bears some liability for its poor supervise and management to its chop.

Back to the client’s “blank contract” question, our Chinese lawyers will always advise against such an action. Whatever convenience is gained by having such pre-stamped documentation available is far outweighed by potential for employees to print themselves or their friends favorable loans of company funds or business contracts!

If a company for some reason insists on conducting its operations this way there should be a strict system of registration and monitoring for all such blank documentation. The company should have a meticulous policy on management of such documents and a specific responsible person should be named who is authorized to approve utilization of the blank pages.

Published by Bonnie Zhang on January 5th, 2017 tagged Uncategorized | Comment now »

China Pollution Inspires Legal Action

China has put huge amounts of effort and resources into development, improving conditions in cities, and raising the collective living standards. As a result of this burst of development, Chinese are now more wealthy, but cities are covered with a dome of thick smog. China has noted the high costs paid by other countries worldwide in the restoration of the environment, cities such as London used to have their own domes of smog and soot; but China can’t simply shut down all the factories, or give up the manufacturing core of its economy.

The strangest part is that blue skies are always seen on days were there are important government activities, or international conferences in the area. People speculate the government may have a huge unknown environmental control apparatus which can be switched on and off as needed.

Many buy breath masks and tolerate the grey skies and high 2.5pm. Others seek to change the situation through the few legal avenues available. Chinese lawyers from Beijing, Tianjin and Hebei have united to initiate a series of administrative actions against the municipal governments of Beijing and Tianjin and the provincial government of Hebei, suing these governments on the theory of non-performance in regards to an obligation to provide clean air.

According to Chinese laws as to clean air, a local government is responsible for supervising air quality. Therefore, such local governments seem to the right party to sue as regards the overwhelming problem of smog. One citizen traveling in Zhengzhou for a business trip, sued the local government to compensate him for costs of his breathing masks while in the city.

Such lawsuits are breaking legal ground in China, and are hot topics amoung Chinese legal professionals, and ordinary citizens alike. These individuals are admired for their efforts to protect their own rights and the environment in new ways and the courage to do so.

As China lawyers, Lehman, Lee & Xu encourage people everywhere to be aware of legal rights, and to take action to use appropriate legal channels to protect those rights. United action will work to improve everyone’s future.

Published by Crys Zheng on January 3rd, 2017 tagged Uncategorized | Comment now »