The Party continues to maintain a close focus on anti-corruption efforts, as reflected in a recent speech by President Xi Jinping vowing “no mercy” in fighting corruption and singling out the key industries such as pharmaceutical, finance, infrastructure, and energy, as well as state-owned enterprises (SOEs).
On December 29, 2023, the National People’s Congress, amended the Criminal Law. These amendments, which will take effect on March 1, primarily focus on addressing bribery and corruption within private enterprises.
The amendment aims to align the penalties for giving bribes more closely with those for accepting them (Article 390). Previously, the law permitted longer sentences for the less serious cases of bribe-giving compared to equivalent instances of bribe-taking. Both offenses now carry three identical brackets of custodial sentences.
To address the under-prosecution of bribe-giving, the amendment also outlines seven circumstances that warrant heavier penalties. These include bribing multiple individuals, bribery involving public servants, bribing law enforcement and judicial personnel, and bribing officials in various sectors such as workplace safety, food and drug regulation, social security, and education to engage in illicit activities (Article 390).
Additionally, the amendment introduces a higher sentencing bracket for bribe-taking by a public entity (Article 387), bribing a public entity (Article 391), and bribery of civil servants by an entity (Article 393).
For the foreign-invested enterprises (FIEs) the most significant changes under the revised Company Law would be the following three crimes that previously only targeted state-owned enterprises:
- The crime of operating the same type of business (非法经营同类营业罪)
- The crime of illegally making profits for relatives or friends (为亲友非法牟利罪)
- The crime of discounting or selling enterprise assets at a low price for favoritism and malpractice (私舞弊低价折股、出售公司、企业资产罪)
The revised Criminal Law prohibits certain behaviors by the management, supervisors, and senior executives under the category of breach of trust. This includes prohibiting directors, managers, supervisors, and senior executives from engaging in businesses similar to those of the company they work for, illegal profiteering for family or friends, and undervaluing state-owned assets for personal gain (Articles 165, 166, 169).
All three crimes listed above address issues that are, unfortunately, common for foreign-invested companies in China. To ensure compliance, we strongly recommend connecting with our expert team as we can offer 20+ years of valuable guidance to facilitate a smooth and compliant business operations.
Reach out to us today to leverage our knowledge and ensure a successful and legally sound venture in the Chinese business landscape.
S.J. Grand is a full-service accounting firm focused on serving foreign-invested enterprises in Greater China since 2003. We help our clients improve performance, value creation and long-term growth.