China: How to Fire Your General Manager (or Chief Representative) in China

Last Updated: 1 March 2012
Article by Maarten Roos

Limiting the General Manager's power at appointment, and ensuring that his departure from the company is not paired with unnecessary damages.

This article was written for, and first appeared on Business Forum China

It is all too common that a foreign investor appoints a Chinese or expatriate as the General Manager of its Chinese wholly-owned subsidiary or joint venture (or respectively the Chief Representative of its Representative Office), but at some point concludes that this Manager or Chief Representative (GM) does not meet expectations. More often than not, firing the GM is not easy. In a typical case, the GM – who was also the company's legal representative and a director of the Hong Kong holding company – refused to leave. Instead she took the company's stamps, licenses and accounting books home, and even threatened to poison relations with Chinese customers if she was not given a very high severance package.

Preparations to fire any senior manager in China start when he (or she) is appointed. Another crucial time is between when the decision is made to fire him, and when he is informed. And even after terminating the employment relationship, an investor must ensure that all bases are covered. The goal in these processes is usually to have him walk away without further damaging the investor's interests.

Making the Right Decisions when Appointing the Manager

Many foreign investors rely on their GM to develop the business, but another task is to represent the shareholders' interests in decision-making. How much freedom is he given? When establishing a Chinese subsidiary or when appointing a new GM, the investor must first decide whether the GM should also be the company's legal representative.

In China, the legal representative is the only authorized representative of the company towards external parties, and consequently this position comes with a lot of power. Fortunately, the legal representative does not have to be in China! To avoid too much reliance on a China-based manager, many companies prefer to appoint someone at headquarters as the legal representative (who will also be the Chairman of the Board of Directors or the Executive Director). This comes with some potential (criminal) liabilities to the appointee, but with a lot of convenience if a dispute arises with the local manager.

Even if the GM is not the legal representative, in practice he will still manage and control operations. Practical control should be paired, however, with legal restrictions. In the Articles of Association and in Board Resolutions (or Executive Director Decisions) and internal rules, the investor can set legal limitations to the GM's authority in decision-making. For example, contracts valued at more than X-amount, may be subject to BoD or investor approval. If the GM makes decisions beyond his scope of authority, then at least the investor can legally terminate his employment and pursue him for both civil and criminal liability.

Another practical way to limit the GM's power is through the company's stamps. Every company in China has a company chop or seal (a physical stamp that is registered with the Public Security Bureau) that represents the company's legal commitment. It is usually kept by the GM, but it can also be kept by a law firm or accountant. In that case use could require specific approval from the investor, or the company's legal representative. Through this mechanism, the GM is unable to sign contracts, make company amendments or take other actions that would damage the investor's interests.

Taking Important Steps Before Breaking the News to the Manager

Once the decision has been made to terminate the GM, the most important considerations of the investor should be the following:

  1. Is there a legal basis for terminating the employment relationship?

    Presuming that the employment contract is signed under Chinese labor law, there are only a limited number of situations that allow a company to fire an employee. This includes breaching the company's material rules (and thereby causing damages), but not a lack of commercial performance. Also, the burden is on the employer to prove that there was legal cause for the termination. Investors should understand their legal position in advance, and be ready for labor arbitration if the GM refuses to go quietly.

  2. Will the GM be in a position to blackmail the company?

    More often then not, if the GM disagrees with his termination, he may not only fight it in arbitration, but he could also refuse to hand over important materials such as the company stamp, business license, accounting books and keys to the office. As these materials are needed for continuation of operations, his refusal to cooperate could paralyze the business. If this is a real risk, it is better to secure these materials before notifying him of the employment termination – preferably under the guidance of a professional to ensure both pressure on the GM and that the company does not breach his rights.

The situation is even more complicated if the GM is also the company's legal representative. The legal representative has the (only) legal right to represent the company until he has been removed from this position at the company registrar; technically speaking however, the company's registration cannot be amended without the use of the company stamp and the business license, which are usually in the hands of the GM. One way out is to report the stamp and business license missing, apply for new stamps, and then remove the GM from his position using the new stamps, but this will take a lot of time and does not always work (depending on the flexibility of the local officials). Furthermore in the process, the GM has full control over the company, and plenty of opportunity to cause further damages. This is another argument against appointing the GM as the legal representative, and securing important materials before the news of his termination breaks.

What to Expect After Terminating the GM's Employment

Once the GM is informed of the investor's intentions, it is often crucial that he hands over his work immediately. This should include not only his commercial tasks, but also (if not already secured in advance) all the company's stamps, licenses, cash, bank account information etc. To ensure that he holds nothing back, investors are advised to work with experts that have done this before, and know what to ask.

Besides, companies should not forget to notify suppliers and customers of the new situation. Even if legally he has no more authority, third parties that are unaware of the situation may presume his authority, which could lead to problems.

Finally, investors are wise to remember that if the former GM is unsatisfied with his severance package, then it costs him very little in time and money to file a claim in labor arbitration. In the worst case this claim would be for reinstatement (which may be granted if there was no lawful reason for termination), though more often it is about money: severance or economic compensation, pay for unused holidays, overtime payments (even a GM may be entitled to overtime pay) etc. Investors should therefore be prepared to provide evidence on the (lawful) reasons for their decision to terminate, and their notification of the same.


Firing a GM in China is not easy. Chinese employment law is generally regarded pro-employee and so firing any employee is difficult except with due cause. Moreover, the company or its investor(s) must consider in advance the risk that the manager will threaten to paralyze the business, and take appropriate steps to safeguard important materials and thereby minimize this risk.

Just as important, however, is to ensure that the legal framework against which the termination will take place, is supportive. In most cases, it is better not to appoint the GM as the legal representative. Depending on the level of trust, an investor may decide to use a law firm or accounting firm to hold the relevant stamps, to restrict the GM's practical authority. But perhaps most important of all, investors should never rely on standard Articles of Association to create sufficient liabilities in case the GM abuses his position. In a recent case, the GM of a US-invested company had emptied the client's company and personal bank accounts in China booked as vague expenses, but the GM argued that all payments had been (verbally) confirmed with HQ. Without clear written evidence on the limits of her authority (i.e. describing her position and what she was not permitted to do on behalf of the company), the investor had no legal basis to claim against her.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Maarten Roos
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.