On December 29, 2023, the 7th meeting of the Standing Committee of the 14th National People's Congress deliberated and approved the "Amendment to the Criminal Law of the People's Republic of China (XII)" (hereinafter referred to as "Amendment (XII)"), which will be implemented on March 1, 2024. Amendment (XII) has a total of eight articles, with seven articles of substantive amendments. Among them, Three new crimes related to punishing internal corruption in private enterprises have been added , and four articles on bribery-related crimes have been adjusted. While punishing corruption among internal personnel of private enterprises, Amendment (XII) also increases the protection of the rights and interests of private enterprises and entrepreneurs, so as to promote the high-quality development of the private economy with stronger legal guarantees. This article will interpret the content of the revision of the articles for learning and communication.

 

1. Crime of Illegally Engaging in the Same Business

 

(1) Comparison Table of Articles

 

Criminal Law (Revised in 2020)

Amendment (XII) to the Criminal Law

Article 165 of state-owned companies and enterprises Directors and managers Using their positions to engage in the same type of business as the company or enterprise they work for, or to engage in such business for others, and obtaining huge illegal profits, shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also be sentenced to a fine or a fine shall be imposed exclusively; if the amount is particularly huge, they shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years, and shall also be sentenced to a fine.

Article 165 of state-owned companies and enterprises Directors, supervisors, and senior managers Using their positions to engage in the same type of business as the company or enterprise they work for, or to engage in such business for others, and obtaining huge illegal profits, shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also be sentenced to a fine or a fine shall be imposed exclusively; if the amount is particularly huge, they shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years, and shall also be sentenced to a fine. If directors, supervisors, and senior managers of other companies or enterprises violate the provisions of laws and administrative regulations and commit the acts in the preceding paragraph, causing significant losses to the interests of the company or enterprise, they shall be punished in accordance with the provisions of the preceding paragraph.

 

(2) Revision Content

 

1. The subject of the crime is changed from " Directors and managers of state-owned companies and enterprises " revised expanded to "Directors, supervisors, and senior managers of state-owned companies and enterprises" and "Directors, supervisors, and senior managers of other companies and enterprises" 。

 

2. This crime clearly stipulates that if directors, supervisors, and senior managers of other companies or enterprises commit the acts in the preceding paragraph, it must be based on "Violation of laws and administrative regulations" as a prerequisite , with "Causing significant losses to the interests of the company or enterprise" as a result 。

 

(3) Lawyer's Interpretation

 

1. According to the new "Company Law" According to the regulations, senior managers refer to the company's manager, deputy manager, person in charge of finance, secretary of the board of directors of a listed company, and other personnel stipulated in the company's articles of association. Amendment (XII) has increased the scope of attack on this crime and further strengthened the equal protection of private enterprises.

 

2. "Using the convenience of one's position" refers to using the convenience of one's position as a director, supervisor, or senior manager of a company or enterprise to manage materials, supplies, markets, plans, sales, and other positions. "Operating by oneself" includes registering a company or enterprise in one's own name or in the name of relatives and friends, or investing in a company or enterprise run by others. "Operating the same type of business as the company or enterprise in which one works" refers to engaging in the same or similar business as the company or enterprise in which one works. The actor uses the advantages in production, supply, sales, market, materials, information, etc. obtained from his position in the company or enterprise, and uses the human, financial, material, information resources, customer channels, etc. of the company or enterprise in which he works to gain a favorable position in market competition. It occupies a favorable position in the market competition and squeezes out the company or enterprise in which it works, thereby harming the interests of the company or enterprise.

 

3. Considering the differences in governance structure and business status between state-owned enterprises and private enterprises, this article distinguishes the constituent elements of the crime. Specifically, when directors, supervisors, and senior managers of other companies or enterprises constitute the above-mentioned crime, the premise is that they must violate laws and administrative regulations, and their behavior must have corresponding intentional "damage to the enterprise for personal gain", and the result must be significant losses to the interests of the company or enterprise; when directors, supervisors, and senior managers of state-owned companies or enterprises constitute the above-mentioned crime, they must obtain huge illegal profits.

 

(4) Typical Cases

 

"Criminal Trial Reference" [No. 1087] Zhu Guicai et al. Embezzlement Case - How to Distinguish Between the Crime of Illegally Engaging in the Same Business and the Crime of Embezzlement?

 

"Criminal Trial Reference" [No. 1298] Wu Xiaojun Illegally Engaging in the Same Business and Offering Bribes to Non-State Employees Case - The Scope of the Subject of the Crime of Illegally Engaging in the Same Business and the Accurate Understanding of "Same Business"

 

2. Crime of Illegally Seeking Benefits for Relatives and Friends

 

(1) Comparison Table of Articles

 

Criminal Law (Revised in 2020)

Amendment (XII) to the Criminal Law

Article 166 Staff members of state-owned companies, enterprises, and institutions who use their positions to Cause If the interests of the state suffer major losses, they shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also be sentenced to a fine or a fine shall be imposed exclusively; if the interests of the state suffer particularly heavy losses, they shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years, and shall also be sentenced to a fine: (1) Entrusting the profitable business of the unit to their relatives and friends for operation; (2) At prices significantly higher than the market price To Purchasing goods from units operated and managed by their relatives and friends or selling goods to units operated and managed by their relatives and friends at prices significantly lower than the market price; (3) To Purchasing or accepting substandard goods and services from units operated and managed by their relatives and friends.

Article 166 Staff members of state-owned companies, enterprises, and institutions who use their positions to Cause If the interests of the state suffer major losses, they shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also be sentenced to a fine or a fine shall be imposed exclusively; if the interests of the state suffer particularly heavy losses, they shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years, and shall also be sentenced to a fine: (1) Entrusting the profitable business of the unit to their relatives and friends for operation; (2) At prices significantly higher than the market price From Purchasing goods from units operated and managed by their relatives and friends, Accepting services Or selling goods to units operated and managed by their relatives and friends at prices significantly lower than the market price, Providing services of; (3) From Purchasing or accepting substandard goods and services from units operated and managed by their relatives and friends. Staff of other companies or enterprises who violate the provisions of laws and administrative regulations and commit the acts in the preceding paragraph, causing significant losses to the interests of the company or enterprise, shall be punished in accordance with the provisions of the preceding paragraph.

 

(2) Revision Content

 

1. The subject of this crime is from Staff of state-owned companies, enterprises, and institutions , expanded to " Staff of other companies and enterprises" 。

 

2. This article in the current Criminal Law Purchasing goods/selling goods " added " Accepting services/providing services ”。

 

3. The prerequisite for the conviction of staff of other companies and enterprises is "Violation of laws and administrative regulations" 。

 

(3) Lawyer's Interpretation

 

1. The subject of this crime is different from Article 165, and is not limited to directors, supervisors, and senior managers of companies and enterprises, but applies to all staff of companies, enterprises, and institutions.

 

2. This crime lists three specific acts: The first is to entrust the profitable business of the unit to their relatives and friends. This refers to the perpetrator using their position to decide, participate in economic and trade projects, and grasp the market conditions of economic and trade information, and hand over business projects that are known to be profitable to their relatives and friends for operation. "Entrusting to their relatives and friends for operation" includes handing over to units operated by their relatives and friends through investment, management, and holding shares. The second is to purchase goods from units operated by their relatives and friends at prices significantly higher than the market price or to sell goods or provide services to units operated by their relatives and friends at prices significantly lower than the market price. If the goods purchased or sold by the perpetrator to their relatives and friends do not deviate significantly from the market price, it does not constitute a crime. The third is to purchase unqualified goods from units operated by their relatives and friends. This is reflected in the perpetrator purchasing goods of inferior quality and high price from units operated by their relatives and friends when purchasing raw materials. These three types of behaviors occurred frequently in the actual operation of companies and enterprises at that time, and are highly targeted, clearly listed, and do not have any catch-all provisions.

 

3. This crime takes "violation of laws and administrative regulations" as the entry The prerequisite for the crime not only ensures accurate judgment and punishment of the behavior, but also avoids escalating civil disputes to criminal liability to the greatest extent.

 

(4) Typical Cases

 

"Criminal Trial Reference" [No. 187] Yang Wenkang's Illegal Operation of the Same Business Case - Distinction between the Crime of Illegal Operation of the Same Business and the Crime of Illegally Seeking Profits for Relatives and Friends?

 

"Criminal Trial Reference" [No. 1494] Liu Xiaoyu's Case of Illegally Seeking Profits for Relatives and Friends - How to Determine the Crime of Illegally Seeking Profits for Relatives and Friends

 

3. Crime of Embezzlement and Fraudulent Low-Price Discount of State-Owned Assets

 

(1) Comparison Table of Articles

 

Criminal Law (Revised in 2020)

Amendment (XII) to the Criminal Law

Article 169  The directly responsible person in charge of a state-owned company or enterprise or its superior competent department, who embezzles and commits fraud, discounts or sells state-owned assets at a low price, causing significant losses to state interests, shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention; if the state interests suffer particularly heavy losses, he shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years.

Article 169  The directly responsible person in charge of a state-owned company or enterprise or its superior competent department, who embezzles and commits fraud, discounts or sells state-owned assets at a low price, causing significant losses to state interests, shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention; if the state interests suffer particularly heavy losses, he shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years. The directly responsible person in charge of other companies or enterprises who embezzles and commits fraud, discounts or sells the company's or enterprise's assets at a low price, causing significant losses to the interests of the company or enterprise, shall be punished in accordance with the provisions of the preceding paragraph.

 

(2) Revision Content

 

The subject of this crime is from The directly responsible person in charge of a state-owned company or enterprise or its superior competent department expanded to The directly responsible person in charge of other companies or enterprises , which increases the scope of the crime and further strengthens the equal protection of private enterprises.

 

(3) Lawyer's Interpretation

 

1. The subjects of this crime are "the directly responsible person in charge of a state-owned company or enterprise or its superior competent department" and "the directly responsible person in charge of other companies or enterprises," which expands the scope of the subjects of the crime.

 

2. In this crime, Discounting or selling company or enterprise assets at a low price ", its manifestations are diverse: some do not conduct asset appraisals of company property during the process of joint ventures, cooperative operations, and joint-stock reforms, or although asset appraisals are conducted, they deviate from the value of the appraised assets and discount shares at a low price; some underestimate physical assets; some company assets are not discounted at the replacement price, and the increased value is not calculated, but only discounted at the original book value; some do not include intangible assets such as trademarks and goodwill of companies and enterprises into state shares; and some sell land and factory buildings belonging to the enterprise to private business owners at low prices without the approval of the competent department or the valuation of the appraisal organization, and collect kickbacks from them, etc.

 

3. This article does not use the simple expression of "having the behavior in the preceding paragraph", but specifically describes the crime as "embezzling and committing fraud, discounting or selling the company's or enterprise's assets at a low price", because although the behavior patterns of the first and second paragraphs are consistent, the objects of the behavior are different. The first paragraph is state-owned assets, and the second paragraph is company and enterprise assets. It is expected that subsequent judicial interpretations will make corresponding adjustments to the name of this article.

 

(4) Typical Cases

 

The Second Typical Case of Civil Procuratorial Supervision by the Supreme People's Procuratorate: Zhang's Private Lending Dispute with a Real Estate Company under Supervision by Virtue of Office

 

About the author

 

 

Chen Zhen

 

Chen Zhen, Bachelor of Laws from Guangxi University, Master of Laws from China University of Political Science and Law. Currently serves as a senior partner and deputy director of Guangxi Tongwang Law Firm, deputy director of the Criminal Professional Committee of the Guangxi Lawyers Association, member of the Criminal Professional Committee of the All China Lawyers Association, and is employed as a consultant of the Expert Assistance Group for Maintaining the Legitimate Law Enforcement Rights of People's Police of the Public Security Department of Guangxi Zhuang Autonomous Region, an expert member of the Legal Service Group of the Autonomous Region Federation of Industry and Commerce, a member of the lecturer group of the Autonomous Region Federation of Industry and Commerce's "Guangxi Rule of Law Private Enterprise Construction", a lawyer of the Autonomous Region-level Private Enterprise Lawyer Service Group, a researcher of the Theoretical Research Base of the Nanning Municipal Party Committee United Front Work Department, and a professional of the Nanning Municipal Enterprise Compliance Third-Party Supervision and Evaluation Mechanism.