China Business: Corporate Seals Explained

In practice, the corporate governance of a company in China is established in the utilisation of a company's corporate seals and company seal policies.

The corporate seal, often called a "chop", represents an unlimited power of attorney vested in the holder of the corporate seal(s). Once the seal is affixed to a document, the company is legally bound and effective, whilst signatures are not enforceable under Chinese law. Therefore, as a matter of best practices, a corporate seal policy should be formulated and implemented to instruct proper use and safeguard of a company's corporate seals.

It can't be emphasised enough that a company without a proper seal policy and adherence to that policy can result in serious company mismanagement and failed governance.