On May 10, 2019, the second “ZhongYin Lecture Hall” in 2019 was hosted as scheduled. In the lecture, Attorney Liu Peng, a risk control expert specially appointed by (China) Commerce Development Center, shared his experience in practice on the subject “Corporate Seal Management and Legal Risk Prevention and Control”. Our senior partner Chen Yongxue presided over the lecture. Over 30 attorneys of the firm attended this lecture on site, and over 150 colleagues from head and branch offices watched this lecture via live webcast.

Liu Peng

Chen Yongxue

Liu Peng had worked in the legal department of the head office of a joint-stock bank for many years. During this period, he handled and resolved many daily events of risk associated with seal of the bank, and led the joint-stock commercial bank to effectively deal with and properly handle many domestic and cross-border litigation cases related to validity of authorization and signature/seal. After moving to the lawyer profession, Liu Peng handled a number of difficult and complicated litigation and arbitration cases involving seal.

In this lecture, starting from the classification of seal, Liu Peng explained the legal issues related to seal in simple terms. Seal is very important for state administrative organs, enterprises and public institutions, and may be used to confirm legal relationship, prove subject of legal relationship, identify subject of act, and indicate authority of agent. In recent years, there has been an increasing number of cases of business risk caused by seal. Where of disputes are most happened in the civil area where seals are used relatively more frequently.

The lecture is ongoing

Based on years of practical experience, Liu Peng summed up 9 common problems in corporate seal management and elaborated them with cases. In a case of a bank sub-branch’s false wealth management, the person in charge of the bank sub-branch, in order to fill the gap (in bill) caused by fake official seal, illegally issued false wealth management products to redeem matured bills -- this can be described as mistake plus mistake brewing catastrophe; Mr. Cui, former general manager of an airport, by “borrowing new loan to repay the old”, signed a loan contract with a bank with privately engraved official seal, obtained a loan by deception and handed it over to others, and was finally sentenced for the crime of loan fraud; the “开房(check in)” subpoena of a court is so awkward that the public don’t know how to react (“开房”, apparently a spelling mistake for “开庭(court hearing)”). All these cases have exposed huge loopholes in official seal management process.

Nowadays, electronic seals and electronic signatures are becoming more and more popular. Through big data analysis, Liu Peng found that people's courts mainly invoke Article 14 of the Electronic Signature Law (“Reliable electronic signatures have the same legal effect as handwritten signatures or seals.”) to determine the validity of electronic seal. Taking as example the civil judgment of the second instance on a small loan contract dispute between Mr./Ms. Yuan and a small loan company, Liu Peng explained the 4 elements of the statutory “reliable electronic signature” one by one.

In order to deal with the legal risks in corporate seal management, Liu Peng made 11 suggestions, such as a seal should be kept by a dedicated person, a seal should be affixed in the presence of two persons, a blank letter of authorization should be used with caution, and waste should be recycled to prevent accidents. Finally, in the Q&A session, the participating attorneys spoke enthusiastically and raised questions about seal-related issues in the cases handled by them, and Liu Peng answered them one by one. The atmosphere was very enthusiastic, and this lecture was well received by the participants.