Research on the Legal Pathway for Removing the De facto Legal Representative Registration - From the Perspective of Disputes over Requesting Changes in Company Registration

The phenomenon of someone holding the position of the company's legal representative but not actually performing the duties is quite common in business practices. After the person holding the position leaves the company, they "want to quit but can't", and the company's actual controller refuses to cooperate with the change of registration, resulting in the person holding the position being involved in the company's debt disputes, suffering restrictions on high consumption, damage to credit records, and getting into legal trouble. The new "Company Law of the People's Republic of China" implemented on July 1, 2024, Article 10, for the first time establishes the resignation right of the legal representative and the company's obligation to fill the vacancy in legislative form. The "Implementation Measures for Company Registration Administration" implemented on February 10, 2025, Article 23, further opens up the execution path for removing the registration, providing unprecedented institutional support for the person holding the position to "break free". Based on the logic of identifying problems, analyzing problems, and solving problems, this article systematically reviews the legal risks of the person holding the position as a nominal representative, discusses the issue of "imbalance between rights and remedies", explains the breakthroughs of the new "Company Law" and its supporting regulations, extracts core review points from judicial practice, and provides an operational path for removing the registration. The aim is to provide reference for practical work.

01

The issue raised: The practical predicament of nominal legal representatives

(1) The typical scenario of "wanting to quit but unable to do so"

In business practice, the phenomenon of holding the position of the company's legal representative while not actually performing the duties is extremely common. The typical scenarios can be broadly classified into the following categories:

Scene 1: Employees are appointed as nominal representatives. When the company goes through the process of registering with the industrial and commercial authorities, for various reasons, ordinary employees are assigned to serve as the legal representatives. These employees rarely participate in the company's management and do not possess the company's seals or certificates. When they leave the company, they discover that their names are still listed in the industrial and commercial registration system, while the company has already disbanded or the actual controller's whereabouts are unknown.

Scene 2: Relatives or friends acting as the legal representative. The actual controller of the company, in order to avoid legal risks or for other business considerations, requests relatives or external individuals to serve as the legal representative, falsely promising that "it's just a nominal position and no responsibility is required". When the company encounters debt crises or legal disputes, the actual controller may either disappear or refuse to cooperate in handling the change registration procedures.

Scene 3: Professional Nomination. Some institutions specialize in "registration agency services", providing "nomination of legal representatives" to clients who do not meet the requirements for holding positions. This forms a professional nomination industry chain. The companies under the names of the professional nominators are numerous, disorganized, and carry extremely high risks.

(2) The Failure of Traditional Relief Approaches

When the nominee requests the company to handle the change registration, they often encounter the following obstacles:

Obstacle 1: Company's non-cooperation. The actual controller of the company refuses to cooperate in holding shareholders' meetings and board meetings, and in appointing a new legal representative. As a result, the registration of the change of the legal representative has fallen into a "dead loop" - without the signature of the new legal representative, the change cannot be processed; without the change registration, a new legal representative cannot be elected.

Obstacle Two: Corporate Governance Stagnation. The company has reached a governance deadlock due to conflicts among shareholders, disputes over equity, or the disappearance of the actual controller. Some agreements require the signature of the legal representative, but the nominal legal representative refuses to sign, preventing the company from conducting normal business operations.

Obstacle Three: There is no basis for cancellation registration. In the old law era, when courts handled such cases, they faced a dilemma: if they supported cancellation, the registration items of the legal representative would be left blank, and there would be no operational precedent; if they supported modification, they would have to first determine a new successor, but the company was unable to provide such information.

(III) The Turning Point Brought by the New "Company Law"

On July 1, 2024, the newly revised "Company Law of the People's Republic of China" came into effect. Article 10 of this law for the first time established an obligation system for the resignation of the legal representative and the appointment of a successor in the company, providing a direct legal basis for eliminating registration disputes. The "Implementation Measures for Company Registration Administration" that came into effect on February 10, 2025, further clarified the elimination public announcement system, bridging the "last mile" of judgment execution.

This series of legislative and judicial measures have fundamentally changed the situation where the nominal legal representative "cannot be dismissed", and have also provided new research topics for legal practice.

02

The legal risks associated with being merely listed as the legal representative

Before discussing the relief options, it is necessary to first address the actual legal risks faced by those who merely hold the position of legal representative. Being a nominal legal representative is by no means an "exemption certificate". Although the nominal legal representative does not participate in the actual operation, they are legally required to assume corresponding responsibilities on behalf of the legal representative.

(1) Restricting High-Consumption Activities and Dishonesty Lists

According to Article 3, Paragraph 2 of the "Several Provisions of the Supreme People's Court on Restricting Defendant's High-Consumption and Related Consumption Behaviors" (Amended in 2015)， if the person subject to enforcement is a legal entity， after being subject to the restriction on high-consumption and related consumption behaviors， the person in charge of the entity， the main person in charge， the direct responsible personnel who have an impact on debt repayment， and the actual controller shall not engage in high-consumption and related consumption behaviors. This regulation clearly includes the person in charge of the entity as an applicable object for the restriction on high-consumption and related consumption measures， without the need to review whether the person in charge actually participates in the company's operations or whether there is any fault on their part regarding debt repayment.

The specific restrictions of the consumption control measures are clearly stipulated in the first paragraph of the third article mentioned above, including: when taking transportation, choosing flights, first-class or above cabins on trains, or second-class cabins on ships; engaging in high-end consumption at star-rated hotels, guesthouses, nightclubs, golf courses, etc.; purchasing real estate or building new, expanding, or decorating high-end houses; leasing high-end office buildings, guesthouses, apartments, etc. for office use; purchasing non-operational essential vehicles; traveling or vacationing; sending children to high-cost private schools; paying high premiums for insurance products, taking all seats on G-series bullet trains, or first-class seats or above on other bullet trains; and other non-necessary consumption behaviors such as those not related to life or work, such as these.

What is even more serious is that after the company is included in the list of dishonest被执行人， the legal representative will also suffer negative impacts on their social credit evaluation. Their personal credit records， bank loan approvals， and business partnerships will all be affected.

In Case No. 596 of the Enforcement Supervision Division of the Supreme People's Court in 2024, the Supreme People's Court clearly stated that even if the shareholders' meeting has passed a resolution to remove the legal representative's position, as long as the change in the business registration has not been completed, the person should still be regarded as the legal representative of the company. Moreover, the provided evidence cannot prove that he/she does not belong to the legal representative. Therefore, the restriction on consumption measures remain valid. This case fully demonstrates that before the registration cancellation is completed, the business registration information is the sole basis for determining the legal representative's identity.

From this, it can be seen that the nominal legal representative should initiate the cancellation procedure as soon as possible to avoid being dragged into the restrictions and credit blacklisting process before considering the cancellation.

(II) Administrative Penalty Liability

When the legal representative of a company is involved in administrative penalties, they may encounter the following risks:

Direct liability assumption. According to relevant laws and regulations, when a company commits an illegal act, the legal representative, as the main person in charge of the company, may be identified as the "directly responsible person in charge" and bear the responsibility for administrative penalties. For example, Article 135 of the "Food Safety Law of the People's Republic of China" stipulates that the legal representative, directly responsible person in charge, and other directly responsible persons of the food production and business operators whose licenses have been revoked shall not apply for food production and business licenses or engage in food production and business management work for five years from the date of the penalty decision.

Obligation to Cooperate in Investigations. The legal representative has the obligation to cooperate with the administrative authorities in their investigations. If they refuse or obstruct the administrative authorities from conducting investigations in accordance with the law, they may face additional administrative penalties.

(III) Criminal Liability Risks

In cases of corporate crimes, the legal representative, as the main person in charge of the company, is highly likely to be identified as the "directly responsible person in charge" and thus bear criminal responsibility. According to Article 31 of the Criminal Law of the People's Republic of China, for corporate crimes, the company shall be fined, and the directly responsible person in charge and other directly responsible personnel shall be sentenced.

The common types of unit crimes in practice include: the crime of issuing fake value-added tax special invoices, the crime of illegally absorbing public deposits, the crime of polluting the environment, the crime of producing and selling substandard products, and the crime of refusing to execute judgments or rulings, etc.

(4) Qualification Requirements for Position Holding

If a company is legally punished and its business license is revoked, or it is ordered to close down, and the legal representative is found to have personal liability, the legal representative shall not serve as the director, supervisor, or senior manager of any other company for three years (referred to as "director, supervisor, and senior manager"). For those who merely hold a position in a company for show purposes, this risk is particularly prominent - the more companies they are listed as the legal representative of, the greater the possibility that their qualification for holding the position will be restricted due to the illegal activities of one of those companies.

03

Old Law: Rights and Remedies

(1) Article 13 of the Company Law of 2018

Referring back to the provisions of Article 13 of the Company Law in 2018, it was a principle-based statement:

"The legal representative of the company is appointed by the chairman, executive director or manager in accordance with the provisions of the company's articles of association, and is registered in accordance with the law. If the legal representative of the company changes, a change registration must be carried out."

This rule:

No clear resignation rights. This article does not stipulate that the legal representative can resign unilaterally, nor does it specify the legal consequences of such resignation. In practice, companies often refuse to handle the change registration on the grounds that the legal representative "did not obtain the consent of the company".

No relief path is stipulated. This article does not specify how the legal representative can obtain judicial relief when the company refuses to cooperate in the change registration process. After the nominee files a lawsuit with the court, the court often refuses to accept or dismiss the lawsuit on the grounds of "internal governance matters of the company".

No liquidation rules are stipulated. This article fails to distinguish the different functions of "change registration" and "liquidation registration". In the case where the company is unable to select a new legal representative, this article cannot provide a legal basis for liquidation registration.

(II) Judicial Practice

In the old legal era, the courts in different regions had distinct standards for resolving disputes regarding the cancellation of the registration of nominal legal representatives:

Whether to accept. Some courts hold that the cancellation of the registration is an internal governance matter of the company and the court should not intervene, thus ruling to refuse acceptance or dismissing the lawsuit. Another group of courts, however, believe that the legal representative has the right to assert rights in accordance with the provisions of the "Civil Code of the People's Republic of China" regarding agency contracts, and thus rule to accept the case.

Whether to support cancellation. In the cases that have been accepted, some courts have supported the cancellation of the registration, while others have rejected the lawsuit request on the grounds that "cancellation would result in the vacancy of the legal representative". The inconsistency in the judgment standards has led to completely different judgment results for similar cases.

The issue of succession after the removal. Even if the court supports the removal, in the absence of a new legal representative being elected by the company, the industrial and commercial department often refuses to handle the removal registration on the grounds that "the registration items cannot be left blank". The enforcement of the judgment is in a difficult situation, and the rights and interests of the nominal owner cannot be effectively guaranteed.

This characteristic stems from the "imbalance between rights and remedies" in the old legal era: although the legal representative theoretically had the right to resign, when the company refused to cooperate, the judicial remedy channels were not smooth, and the cancellation registration lacked a standardized basis.

04

The breakthroughs of the new "Company Law"

The newly implemented "Company Law" on July 1, 2024, fundamentally addressed these issues at the legislative level and provided a complete set of regulatory basis for the cancellation of registrations.

(10) Article 10: Establishment of the Right to Resign

Article 10 of the new "Company Law" is a newly added clause in this revision, providing the most direct legal basis for the cancellation of registration. The provision states:

The legal representative of the company is appointed in accordance with the provisions of the company's articles of association. It is the director or manager who represents the company to handle its affairs. If the director or manager serving as the legal representative resigns, it is regarded as the simultaneous resignation of the legal representative. If the legal representative resigns, the company shall determine a new legal representative within 30 days from the date of the resignation.

The normative structure of this rule consists of three levels:

First level: The substantive limitations on the basis of appointment. This article clearly restricts the legal representative to "the director or manager who represents the company to handle the company's affairs". This means that only the directors or managers who actually handle the company's affairs are eligible to serve as the legal representative. Therefore, if someone who holds the position of legal representative merely does so in a nominal capacity and does not actually participate in the company's affairs, the legitimacy of their status as the legal representative is in question - they are not "representing the company to handle its affairs" as directors, and thus the prerequisite conditions for their appointment as the legal representative have not been met.

Second level: The automatic effect of resignation. "If a director or manager who holds the position of legal representative resigns, it is regarded as simultaneously resigning as the legal representative." This regulation establishes the automatic effect of the extinction of the legal representative's position, without the need for the company to make a separate resolution to confirm it. It has significant practical significance: After a nominal director resigns from the director position, the legal representative position is simultaneously extinguished, without the need for additional steps.

The third level: The company's legal obligation to appoint a replacement. "If the legal representative resigns, the company must determine a new legal representative within 30 days from the date of the resignation." This 30-day period is a mandatory regulation. If the company fails to appoint a new legal representative within this time limit, it will be in violation of its legal obligation. The nominee has the right to request the court to order the company to fulfill the obligation of removal in accordance with this provision.

In conjunction with Article 933 of the Civil Code regarding the right of unilateral termination in agency contracts, the legal relationship of agency between the legal representative and the company grants the legal representative the unilateral right to resign without the need for the company's consent. On this basis, Article 10 further clarifies the automatic effect of resignation and the time limit for the company to appoint a replacement.

(2) Article 35: Key provisions for removal of execution

Article 35, Paragraph 2 of the New Company Law stipulates:

"When the legal representative of a company is changed, the application for change registration shall be signed by the new legal representative."

This clause contains an extremely important legal logic: the signatory of the change registration application form is the "newly appointed legal representative", rather than the "former legal representative". This regulation directly denies one of the most common defenses used by companies in such cases - that the original legal representative must cooperate in signing the change registration documents before the cancellation registration can be processed.

Specifically: After the judgment for removal takes effect, the original legal representative is no longer the legal representative of the company. The entity signing the application for change of registration should be the newly determined legal representative (the company must appoint a new one), rather than the person who was merely listed but no longer holds the position. When the industrial and commercial department processes the registration based on the court's assistance execution notice and the removal judgment, it only requires the new legal representative to sign the application (the company can appoint a temporary person to sign instead), and there is no need for the former listed person to sign in agreement.

This regulation has removed the main obstacle to the enforcement of the cancellation judgment: The completion of the cancellation registration does not require the cooperation of the original nominee. The company has no right to refuse to handle the cancellation registration on the grounds that "the original legal representative did not sign".

(3) Article 70: Reference to the Rules for Directors' Resignation

Article 70, Paragraph 3 of the New "Company Law" stipulates:

"If a director resigns, he/she shall notify the company in writing. The resignation takes effect on the date when the company receives the notice. However, in cases as stipulated in the preceding paragraph, the director shall continue to perform his/her duties."

Although this article directly regulates the resignation of directors, the legal logic contained therein holds significant reference value for cases involving the removal of the legal representative:

Rules for the effectiveness of written notices. For a director to resign by giving a written notice to the company, it is a necessary condition that the company receives the notice. The resignation takes effect on the date the company receives the notice. This is in complete accordance with the procedural requirement in the removal lawsuit that the plaintiff must first deliver the resignation notice to the company. It provides a regulatory basis for the preconditions of the removal lawsuit.

Automatic effectiveness rule. The resignation notice becomes effective upon delivery to the company, without the need for the company's consent or further resolution. This further confirms the automatic effectiveness rule for the resignation of the legal representative.

Exception for continuing duties. In cases where "the term of a director expires without timely re-election, or a director resigns during their term resulting in the board of directors having fewer members than the legal requirement", the director shall continue to perform their duties. This exception rule reminds the nominees: Before the cancellation registration is completed, if the number of directors on the board is lower than the legal requirement or there are other special circumstances, the resignation of the director still legally requires continued performance of duties, but this does not prevent the advancement of the cancellation registration.

(4) Constraints of the Duty of Good Faith and the Duty of Diligence

Article 180 of the New "Company Law" stipulates:

"Directors, supervisors and senior management personnel have a duty of loyalty towards the company. They should take measures to avoid conflicts between their own interests and those of the company, and must not use their positions to seek improper benefits."

"Directors, supervisors and senior management personnel have a duty of diligence towards the company. When performing their duties, they should exercise the reasonable care that managers typically should have for the best interests of the company."

"If the controlling shareholder or actual controller of a company does not serve as a director of the company but actually handles the company's affairs, the provisions of the first two paragraphs shall apply."

The third paragraph of this article holds significant indicative value: Even though an honorary director does not actually participate in the company's operations, if they actually cooperate with the actual controller to engage in actions that harm the company's interests (such as signing relevant documents), they may still be regarded as the subject of the duty of loyalty and diligence for "actually performing the company's affairs", and thus be held legally responsible.

05

The supporting and complementary provisions for the "Implementation Measures for Company Registration Administration"

(1) Article 23: Dissolution of the Public Notice System

Article 23 of the "Implementation Measures for Company Registration Administration" which came into effect on February 10, 2025 stipulates:

"Since the company failed to fulfill its legal obligations related to the registration and filing matters specified in the effective legal documents on time, the people's court sent an assistance execution notice to the company registration authority, requesting it to assist in removing the information of the legal representative, directors, supervisors, senior management personnel, shareholders, and branch managers, etc. The company registration authority, in accordance with the law, publicly disclosed the removed information through the National Enterprise Credit Information Publicity System."

The introduction of this regulation holds significant historical importance, and its core value lies in the following three aspects:

First, an institutionalized path for removing the public notice has been established. This article clearly stipulates that when the court delivers an assistance execution notice to the administrative department for industry and commerce, requiring the removal of registration information, the administrative department must publicly disclose the removed information through the national enterprise credit information public display system. This means that even if there are technical obstacles in the technical operation of removing the registration (such as the industrial and commercial system not supporting the removal of information that is not filled in for the successor), after the removed information is made public through the public display system, the legal risks of the nominee can be effectively mitigated - third parties can learn about the removed information through the public display system, and thus will no longer rely on the industrial and commercial registration to trust the identity of the nominee.

Second, the scope of the objects for removal has been expanded. This article lists the complete list of objects for removal: the legal representative, directors, supervisors, senior management personnel, shareholders, and the heads of branches. This means that the removal rules not only apply to the legal representative, but also to nominal directors, nominal supervisors, and nominal senior management personnel. The removal process has been fully opened up.

Thirdly, the legal effect of the public announcement has been clarified. Once the information is removed and is publicly announced through the national enterprise credit information public display system, it acquires the effect of external public display. A bona fide third party, when conducting transactions with the company, has the obligation to pay attention to and be aware of this public announcement information. They cannot use the registered information of the company to oppose the removal effect.

(2) Improvement of the assistance execution mechanism

After the judgment is made, the plaintiff can apply to the enforcement court for compulsory execution. After the court delivers the assistance execution notice to the administrative department, the administrative department shall handle the cancellation registration in accordance with the law and publicize the cancellation information through the National Enterprise Credit Information Publicity System.

06

The core review points of the court's judgment

After the implementation of the new "Company Law", courts across the country have increasingly reached a consensus in handling disputes related to cancellation of registration. Based on the judicial practices of courts in various regions, courts usually conduct reviews from the following three dimensions:

(1) Has the basis for holding the position been lost?

The court focused on whether there was still a substantive connection between the claimant and the company. The criteria for judgment typically include:

Whether the person actually participates in the company's operations. If there is no substantive connection between the legal representative and the company (such as not participating in management and operation, not holding shares, not receiving salary, not having access to the company's seals and licenses, etc.), the court usually supports the removal.

Does he still meet the qualification requirements for the position? According to Article 10 of the new "Company Law", the legal representative must be "a director or manager who represents the company to handle its affairs". If the nominee is no longer a director or manager of the company (such as having resigned), the prerequisite for him to hold the position of legal representative no longer exists.

Whether they are company shareholders. It is particularly important to note that if the person making the removal request is also a company shareholder, the court may consider that they still have a substantive connection with the company, and thus may not support the removal. For example, in the case of Shanghai Pudong District Court (2024) Huo0115 Civil Initial No. 46947, the legal representative held 81% of the company's shares and could convene the shareholders' meeting by himself to make a resolution for a change of directors. However, he did not exhaust internal remedies before directly filing a lawsuit, and the court did not support the removal.

(2) Has the company exhausted all internal remedies?

Courts generally hold that the judiciary should respect the autonomy of companies. Only when the claimant has exhausted all internal remedies within the company but still fails to achieve the removal, does the judicial intervention possess rationality and necessity.

Internal remedies usually include: issuing a resignation notice in writing to the company; proposing the appointment of a new legal representative to the board of directors or the shareholders' meeting; when the company refuses to cooperate, commissioning a lawyer to send a lawyer's letter; and retaining all records of communication with the company.

Situations where internal remedies are not necessary: The company's governance has reached a deadlock (such as shareholders being unreachable, the company having its business license revoked and not yet deregistered, or being unable to hold a shareholders' meeting, etc.); the company's actual controller is missing and cannot be contacted; the company has ceased operations and dismissed all its employees.

In the case "Zhang Mou v. Lianzhong Real Estate Development Co., Ltd. - Request for Change of Company Registration" (2023-08-2-264-003) that was filed with the Supreme People's Court, Zhang Mou was the company driver and merely held the position of nominal legal representative. He did not participate in the company's management and operation. After leaving the company, the company refused to cooperate in the change of registration. The court held that Zhang Mou had no substantive interest connection with the company and was not a shareholder, and thus could not change the registration through internal remedies. Therefore, the court ruled to revoke the registration.

(3) Whether the absence of a new legal representative constitutes an obstacle

Some companies, upon receiving the resignation notice, refused to handle the change registration citing the lack of a newly elected legal representative. Regarding this issue, the courts' positions have become increasingly consistent:

Article 10 of the new "Company Law" clearly stipulates that "The company shall determine a new legal representative within 30 days after the resignation of the current legal representative." The subject of this obligation is the company, not the nominal holder. If the company fails to determine a new legal representative within 30 days, it is due to the company's own failure to fulfill its legal obligations. The violation of this obligation cannot be shifted onto the nominal holder.

The function of the cancellation registration is to remove the person who made the cancellation request from the registered matters, rather than establishing new registration obligations for others. Whether a company selects a successor is an internal governance matter of the company and is a different issue from the cancellation registration. In cases such as (2024) Xing0102 Civil Initial 9019 and (2024) Su 1311 Civil Initial 5096, the courts have all clearly held this view.

07

The practical steps for canceling the registration

(1) Step 1: Issue a written resignation notice

This is the starting point for initiating all procedures. The nominal legal representative should send a resignation notice in writing to the company (the registered business address and actual operating location), and simultaneously copy it to the company's board of directors, shareholders' meeting, and other authorized institutions.

(2) Step 2: Exhaust internal remedies within the company

Send a reminder letter to the company's shareholders and actual controllers, requesting them to cooperate in convening the shareholders' meeting or the board of directors, appointing a new legal representative, and handling the change registration. If the company does not respond, it is recommended to entrust a lawyer to send a lawyer's letter, and keep a copy of the letter and the mailing Certificate.

At the same time, all communication records with the company should be retained: WeChat chat records, email exchanges, phone recordings, etc., as evidence that internal remedies have been exhausted.

Special Note: If the person requesting the dissolution is also a shareholder of the company (even if they are a nominal shareholder), the court may require them to prove that they have attempted to convene a shareholders' meeting on their own but failed. Otherwise, they may be deemed to have "not exhausted internal remedies" and the dissolution request may not be supported. In this case, it is recommended to submit to the court evidence that a written proposal has been sent to all shareholders and that the shareholders have not responded.

(3) Third step: File a lawsuit for cancellation of the registration

The statement of the lawsuit claim: Order the defendant company to remove the registration of the plaintiff as the legal representative within × days from the date of the judgment taking effect. It is also recommended to request the removal of the registration of related positions such as directors and managers to avoid any omissions.

Case type selection: Request for alteration of company registration dispute. As of January 1, 2026, the Supreme People's Court has explicitly added a fourth-level case type, "Removal of Company Registration (Filing) Dispute", under the category of "Request for Alteration of Company Registration Dispute".

The defendant's position: The company itself is a qualified defendant. The company is both the entity responsible for determining the successor legal representative and the entity handling the change registration. Shareholders, actual controllers, or the legal representative themselves are not qualified defendants.

(4) Fourth step: Execution after the judgment

After the court judgment takes effect, if the company still refuses to cooperate in handling the change registration, the claimant may apply to the enforcement court for compulsory execution.

Materials for applying for compulsory execution: Compulsory Execution Application Form; Valid Judgment Document and Validity Certificate; Applicant's Identity Proof Materials; Basic Information of the Person Subject to Execution (Company).

Court's assistance in enforcement: After the enforcement court delivers the "Assistance Enforcement Notice" to the market supervision bureau, the market supervision bureau shall, in accordance with the provisions of Article 23 of the "Implementation Measures for Company Registration Administration", handle the cancellation registration and publish the cancellation information through the National Enterprise Credit Information Publicity System.

Reinstatement of consumption restrictions: After the cancellation of the registration, the person whose registration was cancelled no longer holds the position of legal representative. They can submit the cancellation registration proof materials to the enforcement court and apply for the cancellation of the consumption restrictions imposed on them.

Remedies after cancellation: If the claimant suffers losses due to their position as the nominal legal representative (such as being restricted from high-end consumption or being held accountable for administrative responsibilities, etc.), they have the right to claim compensation from the actual controller or the person who invited them to assume the position. The legal basis includes: Article 929 of the Civil Code regarding the compensation for losses of the trustee in a commission contract; the provisions on tort liability.

08

Conclusions and Recommendations

(1) Conclusion

Serving as the legal representative in an honorary capacity entails multiple legal risks, including restrictions on high-end consumption and being placed on the credit blacklist, administrative penalties, criminal liability, and restrictions on the person's qualification to hold the position. In cases where the company encounters debt crises, administrative penalties, or criminal prosecutions, the honorary representative is often the first to be affected. Moreover, before the registration cancellation is completed, the business registration information serves as the sole basis for determining the identity of the legal representative.

2. In the old legal era, the "imbalance between rights and remedies" was related to the issue of nominal legal representatives. Article 13 of the 2018 Company Law neither clearly defined the right to resign nor stipulated the removal procedures, resulting in an unsmooth judicial remedy path.

3. The 10th article of the new "Company Law" fundamentally addresses this issue at the legislative level: The legal representative must be a director or manager who "executes the company's affairs on behalf of the company". Resignation has automatic validity, and the company has the legal obligation to appoint a replacement within 30 days. Article 35 of the new "Company Law" clearly stipulates that the cancellation registration must be signed by the "new legal representative", eliminating obstacles for cancellation. Article 70 provides a reference for the rules governing the effectiveness of resignation notices.

4. Article 23 of the "Implementation Measures for Company Registration Administration" has established the cancellation public announcement system. The cancellation information is publicly disclosed through the National Enterprise Credit Information Publicity System, which has external publicity effect and effectively compensates for the technical operational limitations of cancellation registration.

5. The rules for lifting the registration have become increasingly mature. Courts usually conduct a review from three aspects: whether the basis for the position has been lost, whether internal remedies have been exhausted, and whether the absence of a new legal representative constitutes an obstacle.

(II) Suggestions

Preventive measures for risks before the event:

Before agreeing to act as the nominal legal representative, thoroughly understand the company's operating conditions, financial status and potential legal risks.

A written agreement was signed with the company's actual controller, clearly defining the nature of the position, the scope of authority, the responsibilities to be assumed, and the conditions for resignation.

• Clearly defined resignation procedures and the obligation of the actual controller to cooperate in handling the change registration procedures;

Avoid signing your name on any company documents that may have legal effect.

Regularly check the company's litigation situation and respond promptly to any abnormalities.

Risk control during the process:

Continuously monitor the company's operating conditions and litigation situations;

• Refuse to participate in any company actions that may result in legal liability;

• Retain the complete evidence chain (such as pay slips, social security records, attendance records, etc.) that does not involve the company's operations;

When abnormal signs are detected in the company, the resignation procedure should be initiated promptly.

Post-event rights relief:

Ensure that the resignation notice reaches the company through an effective delivery method (it is recommended to use notarized delivery).

Utilize all internal relief measures and retain complete communication records;

If necessary, promptly file a lawsuit and claim the cancellation in accordance with Article 10 of the new "Company Law".

After the judgment takes effect, efforts will be made to actively involve the industrial and commercial departments in the enforcement process, and apply for the removal of information disclosure in accordance with Article 23 of the "Implementation Measures for Company Registration Management".

After the registration is completed, promptly apply to the executing court to lift the restrictions on consumption.

Depending on the circumstances, claim compensation from the actual controller to make up for the losses incurred due to the false registration.

The nominal legal representative is by no means an "inert role". The hidden legal risks behind this position cannot be ignored. If you are currently facing the problem of a nominal legal representative, it is recommended that you initiate the relief process as soon as possible. Do not wait until the company is involved in litigation or restricted from high-end consumption before responding passively. Timely consulting a professional lawyer and formulating the optimal strategy can effectively protect your own legal rights and interests.

Reference legal basis:

The Civil Code of the People's Republic of China (implemented in 2021)

2. "Company Law of the People's Republic of China" (Revised in 2023, Coming into Effect on July 1, 2024)

3. "Implementation Measures for Company Registration Administration" (Effective from February 10, 2025)

4. "Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China" (Judicial Interpretation [2022] No. 11)

5. "Provisions of the Supreme People's Court on Restricting Executed Persons from Enjoying High-End Consumption and Related Consumption (Published on July 20, 2015 and Implemented on July 22, 2015)"

6. "Provisions of the Supreme People's Court on Publishing Information of Dishonest被执行人 (Judges) List" (Judicial Interpretation [2013] No. 17

Reference Case:

Supreme People's Court's archived case: Zhang Mou v. Lianzhong Real Estate Development Co., Ltd., requesting to change the company registration (Archive Number: 2023-08-2-264-003)

2. (2024) Supreme People's Court Enforcement Supervision Case No. 596

3. (2024) Huo 0115 Civil Initial Case No. 46947

4. (2024) New 0102 Civil First Instance Case No. 9019

5. (2024) Su 1311 Civil No. 5096

6. (2019) Xinnan Final Judgment No. 392

7. (2020) SU 04 Civil Appeal No. 4189