Subsequent to “Legal Representative in China: Civil Liabilities” and “Legal Representative in China: Administrative Liabilities”, we would like to further brief you on the criminal liabilities involving the legal representative in China based on our knowledge and experience as Chinese lawyers engaged in the field of foreign investment.
Criminal liabilities are the most severe among all legal consequences and are most concerned by foreign investors. It should be noted that in addition to the crime committed by the legal representative himself, the legal representative may also bear criminal liabilities for the crime committed by the company.
1. Relevant Provisions
According to Article 31 of the Criminal Law of the People’s Republic of China (Amended in 2020), where the company commits a crime, such company shall be fined and its directly responsible person in charge and other directly responsible persons shall also bear criminal liabilities. If there are other stipulations in the Special Provisions of this Law or other laws, such stipulations shall apply.
Sub-paragraph 2 of Paragraph 1 of Article 2 of the Notice of the Supreme People’s Court on Printing and Distributing the Minutes of the National Court Trial of Financial Crime Cases stipulates the determination of the directly responsible person in charge and other directly responsible persons in a crime of a company: the directly responsible person in charge is the person who decides, approves, instigates, connives at, and directs the crime committed by the company, who is generally the person in charge of the company, including the legal representative.
2. Common Crimes
According to the provisions of the Criminal Law of the People’s Republic of China, some common crimes that the legal representative can be charged with include the crime of major liability accident, the crime of producing and selling fake and inferior products, the crime of smuggling ordinary goods and articles, the crime of false capital contribution and withdrawal of capital contribution, the crime of hiding or destroying accounting documents, accounting books, and financial accounting reports, the crime of bribery of non-state officials, the crime of tax evasion, the crime of contract fraud, and the crime of illegal business operations, etc.
3. Conditions for Being Investigated for Criminal Liabilities
The legal representative shall be investigated for criminal liabilities during his term of office if the following conditions are met concurrently:
1) The company has committed a crime stipulated in the Criminal Law;
2) The Criminal Law stipulates that the person directly in charge of the company and other directly responsible persons shall bear criminal liabilities for the crime committed by the company;
3) The legal representative is involved in the crime committed by the company by deciding, approving, instigating, conniving at, or directing such crime.
If any of the aforesaid three conditions is not met, the legal representative shall be spared the potential criminal liabilities.
As Chinese lawyers experienced in the field of foreign investment for a long time, we have assisted many foreign invested enterprises in their legal issues related to legal representatives. If you have any legal questions regarding the legal representative, please feel free to contact us via firstname.lastname@example.org.