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.