Many are questioning how a big company like Tencent could allow this fraud to have happened to them. Tencent must have a strong legal team to weed out such mistakes. They should have spotted that the seal may not be genuine.
The use of seals is pervasive and prevalent in China all sectors of society from governments to businesses. It is rather a cultural phenomenon.
For a general understanding of the legal implications of a corporate seal in China, please refer to our past post: the-legal-implication-of-corporate-seal-in-chinese-corporate-practice.
While corporate seals operate as a way to express corporate consents, there are no clear rules about how a corporate seal is made, kept and used. Chinese people are magically obsessed with such seals, an unfortunate legacy of Chinese long feudal history.
Given its importance and easy use, corporate seals are always the subject matter in any internal ﬁght for corporate control. The best example is the ongoing saga surrounding Dang Dang company, China Amazon for selling books, where the founding couple are divorcing, and the husband broke into oﬃce and forcefully took away the corporate seal of the company.
III.Advice to Foreign Merchants Dealing with China
Think about it, if the powerful Tencent can be defrauded by those imposters, what about foreign companies that deal with Chinese businesses?
When a foreign company or merchant for the ﬁrst time, deals with a China company, they shall be very cautious about their use of seals in concluding business contracts. We have seen clients being defrauded by fake seals.
Practically speaking, in today’s tech world, it is exceedingly diﬃcult to discern whether a
corporate seal is real or fake, esp to foreigners. It is advisable that foreign companies shall insist that the legal representative of their China counterpart to sign the contract in person instead of just having a corporate seal. If you wish to understand about legal representative of a China company, then you can read our prior post: Legal representative of China companies.