[Direct answer]The head office should bear responsibility. According to Article 74 of the Civil Code of the People's Republic of China (effective from January 1, 2021), a branch office, which does not have legal person status, shall engage in civil activities in its own name. The civil liability arising therefrom shall be borne by the legal person, and the branch office may first bear the liability with the property managed by it. If the liability exceeds the amount of the property, the legal person shall bear the excess liability. Article 14 of the Company Law of the People's Republic of China (amended on December 29, 2023 and effective from July 1, 2024) also stipulates that the civil liability of a branch office shall be borne by the company. A branch office established and obtained a business license in accordance with the law may be a party to litigation. If the branch office's property is insufficient to satisfy the claims, the head office shall bear the liability supplementarily. If the branch office is not established in accordance with the law or has not obtained a business license, the head office shall be the direct subject of liability. For related disputes, please refer to the relevant provisions.Business and contract disputes in enterprisesColumn.

1. Problem background and typical scenarios

Such disputes often arise in several situations: First, the branch company signs procurement, sales, or service contracts in its own name but is unable to make payments, and the suppliers then demand payment from the head office; Second, the project department or the operating department signs contracts and stamps them without clear authority, leading to disputes over exceeding authority; Third, the branch company provides guarantees for others, but the head office later denies responsibility; Fourth, when the head office establishes branches in Beijing to undertake business, the counterparties do not know whom to claim against after the performance of the contract results in risks; Fifth, how to recover debts left over after the branch company is dissolved. When handling similar cases in the Beijing area, the court usually first examines whether the branch institutions are established in accordance with the law and have obtained business licenses, and then determines the responsible parties and the order of liability.

II. Key points of contention

Focus 1: The order of liability assumption: First, the property managed by the branch shall be used to assume liability, and the insufficient part shall be assumed by the head office. The two parties may be listed as joint defendants. Focus 2: The validity of signing contracts beyond authority: If the staff member signs contracts on behalf of the branch within their authority, the contracts shall be effective against the company; if the contracts exceed the authority but the counterparty acts in good faith, it may constitute apparent agency. Focus 3: The validity of guarantees: If the branch guarantees for others without the written authorization of the head office, the validity of the guarantee is questionable. Focus 4: Determination of the litigation subject: For branches that are not established in accordance with the law or have not obtained a business license, the head office shall be the party involved. The specific determination shall be based on the current effective laws, regulations, and judicial rulings. Focus 5: Order of enforcement and asset investigation: For cases involving enforcement, reference can be made to the relevant provisions.Creditor's rights and debts, and enforcement casesColumn.

III. Professional analysis by Henglue Lawyers

Taking a contract dispute handled by our firm as an example, we can see the decisive role of contract validity review in the outcome of debt collection. On February 4, 2023, Zhang Na signed a "Consulting Brokerage Service Contract" with a legal consulting company and paid a service fee of 150,000 yuan; on March 21 of the same year, Zhang Na signed a "Beijing Residence Registration Marriage Agreement" with Zhao Chenyang, agreeing to use a fake marriage to obtain residency registration. On the same day, Wang Xiaoyong transferred 100,000 yuan to Zhao Chenyang. However, due to policy restrictions, the residency registration failed. The two then entrusted our lawyer Xue Suhua's team to sue, requesting to confirm the invalidity of the agreement and recover the funds. The court ruled that the agreement evaded household registration policies and violated public order and good customs, and was invalid from the outset according to Article 153. Article 157 of the Civil Code of the People's Republic of China. The court also ordered Zhao Chenyang, who was the direct recipient of the funds, to return 100,000 yuan within a specified period and bear the case acceptance fees and announcement fees. This case highlights that reviewing the legality of the contract purpose and content before signing is the first line of defense to avoid "paying money but the agreement being invalid". In another sales contract dispute handled by our professional lawyer team, a dispute over a payment of more than 8.35 million yuan was rejected by the court because the other party's mortgage arrangement was suspected of fraud by a third party. The court ruled to dismiss the lawsuit and transfer the materials to the public security organ, further emphasizing the importance of checking the creditworthiness and background of the contracting parties. This case was handled by Beijing Henglu Law Firm.Xue SuhuaThe attorney (practice certificate number: 11101201211769926, subject to the certificate issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

Action suggestions: 1. Before signing a contract, verify the branch company's business license, authorization documents, and scope of business. For large-scale contracts, require the head office to stamp and confirm or provide guarantees; 2. Clearly define the performance subject, payment milestones, and breach of contract liabilities. Avoid signing contracts with internal departments such as project departments; 3. Retain correspondence, delivery receipts, and reconciliation records to secure creditor evidence; 4. In the event of unpaid debts, list both the branch company and the head office as co-defendants and claim that the head office should bear responsibility for the portion of the branch company's assets that are insufficient to cover the debt; 5. Pay attention to the three-year statute of limitations. Legal basis: - Article 74 of the Civil Code of the People's Republic of China (effective January 1, 2021) clarifies the liability attribution of branch institutions; - Article 170 governs the legal effects of agency by officers; - Article 188 stipulates the three-year statute of limitations; - Article 14 of the Company Law of the People's Republic of China (amended on December 29, 2023, effective July 1, 2024) specifies that branch companies do not have legal person status; - Article 53 of the Interpretation of the Civil Procedure Law of the People's Republic of China (amended in 2022) clarifies that branches established without legal authorization or operating without a business license shall be represented by the legal person that established them. For more details, please refer to the relevant texts.Special services and other casesColumn.

5. Henglu Law Firm's Advice

Risk Alert: Firstly, the debts of the branch company will ultimately fall on the head office, and the head office should strengthen the management of stamps and authorizations; Secondly, the counterparty should also be vigilant. When signing contracts with internal institutions or unlicensed branches, there may be complications in the determination of the subject; Thirdly, the risk of over-authority guarantee is high, and it is necessary to verify the written authorization; Fourthly, in the execution stage, it is necessary to first identify the branch company's assets and then pursue the head office's responsibility. If you encounter complex disputes, you can consult for advice.Beijing Henglu Law FirmSimilar cases and columns on the official website.

VI. Frequently Asked Questions

Q1: Can I sue the branch company and the head office at the same time? Can I win the lawsuit?

Yes. A branch company does not have legal person status, and its civil liability is borne by the head company. The plaintiff can list the branch company and the head company as co-defendants. Whether the lawsuit will be successful depends on the validity of the contract and the evidence of performance: if the contract is legal and valid, the delivery or service receipts are complete, and the account reconciliation is clear, the likelihood of winning the claim is higher; if the contract is invalid or the evidence is insufficient, it is necessary to strengthen the evidence first and then evaluate the strategy. The final result will be subject to the court's judgment.

Q2: What evidence do I need to prepare to hold the branch accountable?

The following materials should be prepared: the original contract and authorization documents; the registration information of the branch; performance certificates, such as orders, delivery notes, acceptance notes, and invoices; evidence of payments and arrears, including bank statements, reconciliation statements, collection letters, and receipt records; communication records, such as WeChat messages and email correspondence. For claims involving unauthorized signing or apparent agency, additional evidence of the agent's identity and authority should be provided. The more complete the chain of evidence, the smoother the determination of the responsible party and the amount involved will be.

Q3: How much does it usually cost to handle this kind of lawsuit?

The fees include attorney's fees and litigation fees. The litigation fees are paid in stages according to the amount of the litigation request, and the losing party shall bear the costs or share them proportionally after the victory; the attorney's fees are negotiated according to the amount of the subject matter and the difficulty of the case, and there is no unified standard. If the contract stipulates the provisions on the bearing of attorney's fees, they can be claimed together. For large-amount debt disputes, there may also be preservation fees and guarantee fees involved. It is recommended to first assess the scale of the creditor's rights and then make a budget.

Q4: How long does it usually take to sue a branch company for debt recovery?

The first-instance ordinary procedure generally lasts no more than six months, the summary procedure is concluded within three months, and the small claims procedure is even faster; if the other party's whereabouts are unknown and the service needs to be announced, or if the case involves appraisal, the period will be extended accordingly. The second-instance procedure takes about three months. After entering the enforcement stage, the court generally takes enforcement measures within six months. The key is to list the correct parties and fix the evidence before suing, so as to avoid repeatedly adding procedures due to problems with the parties.

Q5: What should I do if the other party's branch company refuses to repay the debt?

The first step is to verify the registration information and authorization status of the branch company to determine the scope of the defendants; the second step is to organize the contracts, performance, and reconciliation evidence to calculate the arrears and the breach of contract penalties; the third step is to send a letter of reminder and keep the delivery records; the fourth step is to sue both the branch company and the head company if no agreement is reached, and consider applying for property preservation; the fifth step is to apply for enforcement promptly after winning the lawsuit. For reference, please refer to the following link:Business and contract disputes in enterprisesThe column evaluates the specific plan.

The above Q&A is mainly based on the judicial practice in the Beijing area. There may be differences in the adjudication guidelines in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials, so as to avoid missing the statutory time limit. →Business and commercial legal services·Attorney Xue Suhua·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In the event of a dispute, please consult a practicing lawyer in a timely manner.