Taiwan Credit Insight 5: Company Seals

In North America and Western Europe, you seldom see a seal (or stamp, or chop) on an invoice. Yet this is a standard business practice in Taiwan. Legally, what does the seal mean? How many seals must a company have?

To most young Westerners, a company seal is a synonym of antique. However, in Taiwan and most Asian economies, it is the official endorsement of a contract.

Taiwan’s Civic Code, Article 3 states that “If the person uses a seal instead of his signature, the affixing of such seal has the same effect as of his signature.”

Although signatures are a valid method of executing a contract in Taiwan, the gold standard is to have the counter-party stamped a contract by using the registered company seals. There are two of them: the registered seal of a company (often referred to as the “Big Seal”) and the registered seal of the company’s Legal Representative (often called the “Small Seal”).

In the Apple’s case versus Proview Taiwan, failure to verify if the person is an authorized legal representative of the counter-party, including the seals used in the contract, was part of a costly lesson.

More details from the Wall Street Journal about the Apple and Proview case:
http://www.wsj.com/articles/SB10001424052702304211804577501681233676036

This Credit Insight is an extract from the book Happy Customers Faster Cash, Taiwan Edition and it is now on sale at Amazon.

This book is a learning tool for people engaged in the credit process. It contains three extensive chapters about credit management, business culture and communication with the focus in Taiwan. A chapter is dedicated to discussing various aspects of Taiwan company credit reports.