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  • The Legal Risks and Tactic of Allograph

    The Legal Risks and Tactic of Allograph

    Lee and Wang jointly assigned an agency to handle the registration procedures for the establishment of their company. Because Wang was located in the other city, the agency signed Wang’s name on the documents without authorization. 3 years later, Wang planned to transfer his equity to a third party. While handling the registration procedures for the equity transition, the registration authority rejected his application for the reason that his signature was different from the previous signatures. Wang was caught in a dilemma.

    A series of laws, regulations, such as the ‘Company Law’, the ‘Regulations on Administration of Registration of Companies’, the ‘Regulations on Administration of Registration of Enterprises as Legal Persons’ and etc., have set forth that the shareholders and directors shall sign the documents in handling the registration procedures for the establishment, alteration and annulment. If a company is acquired by submission of false documents (including the documents with the allograph), it would be ordered to rectify the situation, imposed with a fine, or even its registration might be annulled and its business license might be revoked. Meanwhile, the rights owner shall be entitled to claim for the liability of breach the contract or tort liability in accordance with the civil law and the relevant regulations. Then, how could the rights owner protect his/her rights and interests?

    If the allograph is conducted without the authorization, then the rights owner could apply for the annulment of such administrative licenses, in addition with the claim for the administrative compensation, or claim for the civil liabilities. For example, while someone uses the other person’s name to register a company without authorization, according to Article 69 of the ‘Administrative License Law’, such action shall be deemed as obtaining the license via cheating, and such administrative license shall be annulled. In order to protect the rights owner’s rights and interests, he/she could request the registration authority to annul the administrative license, or propose the administrative dissenting declaration, and even to bring an administrative lawsuit against the registration authority.

    For the actual loss due to the allograph, such as a shareholder could not get the dividend or transfer price for the equity transition, or could not get the asset distribution for the deregistration, despite the annulment of such administrative license, the rights owner could bring an administrative lawsuit and claim for the administrative compensation; and/or claim for the civil compensation against the person without authorization and the company (only when the company is aware of such allograph). However, Article 13 of the ‘Interpretations of the Supreme People’s Court Concerning Certain Issues on the Trial of Administrative Licensing Cases’ has prescribed, during the process of the defendant implementing administrative license, ……the defendant has been in accordance with legal procedures to perform examination responsibility with prudent and reasonable, the behavior of others lead to administrative license decision violating the law, the defendant shall not take the compensation liabilities…….. In view of this, if the rights owner could not prove that the registration authority fails to perform examination responsibility with prudent and reasonable, then the claim for the administrative compensation would not be supported by the court.

    Nevertheless, to protect yourself beforehand is much better than to claim the compensation afterwards. You can take the prudent measures as, (1) to take care of the personal identification card, which can prevent the others from taking it and conduct the relevant procedures; (2) to prescribed the liabilities on the breach of the contract in the agent contract while authorizing an agent to conduct the relevant procedures; (3) to have a brief knowledge about the documents and procedures related to the issues, check and confirm the relevant documents and procedures timely.