Institutional Positioning of the Legal Representative of a Company: A Perspective on the Revision of the Chinese Company Law

Abstract

The legal representative system of Chinese companies originated from the reform of state-owned enterprises in the planned economy, and it has inherent flaws at both the practical and theoretical levels. In practice, the system has a strong administrative color, centralizes administrative management and company operation, ignores the balance of rights of the internal members of the company, and may lead to arbitrariness and abuse of the legal representative's authority. Theoretically, the traditional civil law perspective positions the legal representative as the external expression organ of the company, but ignores its functionality as the node of the company's business operation at the level of organizational law. The legal representative should be regarded as an intentional agent based on the support of the company's registration system, and its external effect should be gradually absorbed by the functional agent. In terms of the internal relationship of the company, the legal representative, as an important node of the company's organization and operation, should be changed in full respect of the company's internal governance order and the company's interests. Comparing with the relevant systems in Germany and Japan, the company laws of these countries do not consider that there is an essential difference between the right of representation and the right of agency, and the right of representation usually originates from the collective decision-making and authorization of the board of directors. The legal representative system should return to its functional position in corporate governance, i.e. a kind of special agent in the field of company, whose speciality lies in the credibility generated by the company registration, and at the same time, the exercise of its power and authority should safeguard the interests of the company's internal governance.