By Bill H. Zhang

One of the more common vehicles for entry into Chinese market is for foreign investor to establish a wholly foreign-owned entity (“WFOE”). While a WFOE is the subsidiary of the foreign parent, it is also a Chinese company and governed by the Chinese Company Law. The Chinese Company Law requires that the Chinese company shall have an appointed legal representative. The two most frequently asked questions in my practice over the past years are: 1) what is a legal representative; and 2) if I am the legal representative what exposure do I have for acts of the company. More recently with the revised Chinese Company Law, effective January 1, 2006, many companies are asking what is the requirement for a supervisor or supervisory board, what role does the supervisor play and how much power does the supervisor have. This article seeks to address these questions and assist foreign investors in understanding these aspects of the corporate law in China.

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