Domicile

The term of domicile of a legal person is mostly used where the personal law of the legal person is to be applied.Because in respect of individuals the personal law under some legal systems is the law of the domicile,a number of states insist on using the same term when determining the personal law of legal persons.9 The question as to how to determine the domicile of a legal person has been answered by courts and jurists in various countries in very different ways.The choice lies mainly among three doctrines.

The first doctrine is the center of management.According to this doctrine,the domicile of a legal person is the place where its board of directors meet or where the shareholders hold their meetings.The rationale for this doctrine is that the center of management is the “the head and brain” of a legal person,which should be regarded as its “seat”.This doctrine prevails in Germany,France,Italy,Spain,Austria,Switzerland,Poland,and most other civil law countries,though in many of them dissenting opinions of jurists and even dissenting decisions can be found.This doctrine seems to be sound and logical: the criterion chosen is one which everybody who comes into commercial contact with the legal person can easily check,since the main management center can hardly be kept secret.However,it has been argued against this doctrine in that a legal person may fictitiously or fraudulently designate a place as its management center,while putting its real seat in another place,thus avoiding the law that should otherwise be applicable.

It has been proposed to replace the center of management by the center of operation,which is the main place where the legal person executes its purpose,carries on its principal physical labors,exploits its mine,runs its sawmill or its factory.The reason for this seems to be that an enterprise is not conducted at the place where the board of directors meet and decide on how the work shall be done,or where the shareholders hold their meetings,but that it is the work itself that matters.All this may be true.The remark that “the head and brain of the trading adventure” is situated at the center of management may sometimes embody an over-estimation of the intellectual gifts of the directors;10 in many industrial and high-tech companies the “brain” may be found in the technical research offices attached to the factory,where the decisive discoveries and inventions are made.Furthermore,the center of business is usually more stable than the center of management,which is not likely to be utilized by the parties to evade the otherwise applicable law.Nonetheless,the doctrine is far from satisfactory.First,laying the seat at the center of operation may overlook the fact that the commercial part of the business,such as the buying of raw materials,the selling of product,the conclusion of contracts,and so forth—briefly such acts as may mainly give rise to legal doubts—is usually carried on neither at the mine or factory,nor in the technical departments,but in the place of management; the trading center lies here.Second,corporations often possess more than one center of operation.The mining company may exploit coal mines in China and Russia at the same time; the construction company may have projects in Africa and Asia simultaneously.Notwithstanding the above mentioned defects,this doctrine has been endorsed in some French and German decisions,and many eminent French scholars regard it as the best of all solutions proposed.(https://www.daowen.com)

According to the third doctrine,the domicile of a legal person is the place where that person has been incorporated.This doctrine is rooted in the archaic conception that the grant of legal personality to an inanimate being is as it were an exceptional act of grace and that it is the granting state that imposes the law under which the artificial person shall “live.” It has been endorsed by most common law countries and some Latin-American countries,say,Brazil,Peru,Cuba and Guatemala.11 This doctrine,in spite of its merits,has some weak points as well.For example,a corporation may be established in Hong Kong,but by the wish of its promoters have its seat in the center of its management in Chinese mainland.Such formation of corporations in a foreign jurisdiction for the purpose of acting solely in Chinese mainland is particularly common in China.^[2]In this respect,some English jurists cannot fail to recognize the civil law doctrine which regards the real center of management as the appropriate test.

Chinese law,under the interpretation of many Chinese scholars,adheres to an approach which combines the doctrines of the center of management with that of the center of operation,as Article 63 of the Civil Code provides that “A legal person’s domicile shall be the place where its principal place of business is located.Where a legal person needs to be registered according to the law,it shall register the place where its principal place of business is located as its domicile.”12 Additionally,the Company Law contains a similar provision,as Article 10 states that “[A] company’s domicile shall be the place where its main administrative office is located.”13

According to the understanding of most Chinese authors,“main administrative office” connotes the real seat of a legal person,which may be either the center of management or the center of operation.This approach,though may avoid the problems that may arise by following exclusively the doctrine of the center of management or that of the center of operation,is likely to decrease the predictability and certainty of the domicile of a legal person in practice.