The 12th Amendment to the Criminal Law has been deliberated and passed through legal procedures and is scheduled to come into force on March 1, 2024. This amendment to the Criminal Law is closely related to the senior management of the company, and the senior management of the company must learn it well, otherwise whether it is the senior executive of a state-owned enterprise or the executive of a private enterprise, once he violates the law, the consequences will be unimaginable. Let's take a closer look at the risk points that executives should pay attention to in the performance of their duties under the conditions of the amendment: Amendment 12 to the Criminal Law
This issue is a non-compete clause of the company's directors, supervisors and senior executives. The Company Law stipulates on this issue that without the consent of the shareholders' meeting or the general meeting of shareholders, directors and senior managers of a company shall not take advantage of their positions to seek business opportunities belonging to the company for themselves or others, or to operate a business similar to the company for which they work or for others. And this kind of prohibitive provision has risen to the level of the criminal law, that is, the provisions of the 12th Amendment to the Criminal Law are as follows:
Where directors, supervisors, or senior managers of state-owned companies or enterprises take advantage of their positions to operate a business of the same kind as the company or enterprise for which they work for themselves or for others, and obtain illegal benefits, and the amount is huge, they are to be sentenced to up to three years imprisonment or short-term detention and/or a fine;where the amount involved is especially huge, the sentence is between three and seven years imprisonment and a concurrent fine. Where directors, supervisors, or senior managers of other companies or enterprises violate the provisions of laws or administrative regulations by carrying out the conduct described in the preceding paragraph, causing major losses to the interests of the company or enterprise, they shall be punished in accordance with the provisions of the preceding paragraph.
The 12th Amendment to the Criminal Law makes stricter provisions on the legal consequences arising from the violation of the above-mentioned non-compete business by directors, supervisors and senior executives of a company from the perspectives of state-owned enterprises and private enterprises. Among them, as far as state-owned enterprises are concerned, as long as they obtain illegal benefits, and the amount is huge, they can constitute criminal liability. There is no consideration of whether SOE-related losses have been caused. From the perspective of a private enterprise, if it causes significant losses to the interests of the company or enterprise, it also constitutes criminal liability, and whether the individual actually obtains illegal benefits from it is not within the scope of consideration.
This kind of situation is also more common in practice, and the damage to the company's interests is also more serious. The provisions of the 12th Amendment to the Criminal Code are as follows:
In any of the following circumstances, the staff of a state-owned company, enterprise, or public institution who takes advantage of their position and causes major losses to the interests of the state, shall be sentenced to up to three years imprisonment or short-term detention and/or a fine;and where the interests of the state suffer especially heavy losses, a sentence of not less than three years but not more than seven years imprisonment and a concurrent fine shall be given: (1) handing over the profit-making business of the unit to one's relatives or friends to operate;(2) Purchasing goods or receiving services from units operated and managed by one's relatives and friends with a price significantly higher than the market, or selling goods or providing services to units operated and managed by one's relatives and friends at a rate significantly lower than the market;(3) Purchasing or accepting substandard goods or services from units operated and managed by their relatives or friends. Where the staff of other companies or enterprises violate the provisions of laws or administrative regulations by carrying out the conduct described in the preceding paragraph, causing major losses to the interests of the company or enterprise, punishment is to be given in accordance with the provisions of the preceding paragraph.
The above-mentioned provisions do not bind the senior management personnel of the enterprise, and for the ordinary staff of the enterprise, the above-mentioned acts also constitute a crime. Of course, senior managers of enterprises are more likely to have the above-mentioned criminal legal risks in practice. For state-owned enterprises, as long as the above-mentioned acts constitute a major loss to national interests, they can constitute a crime. For private enterprises, as long as the above-mentioned acts constitute a significant loss of the interests of the enterprise, it constitutes a crime.
Although the behavior of malpractice to the detriment of the company's interests was also mentioned in the previous legal provisions, it was not systematic. This is even less common through criminal law. The amendment to the Criminal Law directly includes it as a key punishment object for criminal violations, which is of great significance for preventing corporate governance risks. The relevant provisions of the amendment are as follows:
Where a person in charge of a state-owned company or enterprise or the competent department at a higher level is directly responsible, who twists the law for personal gain, converts state-owned assets into shares at a low price or at a low price, causing major losses to national interests, he shall be sentenced to fixed-term imprisonment of not more than three years or short-term detention;and where the interests of the state are particularly seriously harmed, a sentence of between three and seven years imprisonment is to be given. Where the directly responsible managers of other companies or enterprises engage in favoritism and malpractice by converting the company's or enterprise's assets into shares at a low price or at a low price, causing major losses to the company's or enterprise's interests, they shall be punished in accordance with the provisions of the preceding paragraph.
According to the above-mentioned provisions, for state-owned enterprises, if the person in charge directly responsible for them commits favoritism and irregularities and commits the above-mentioned acts, causing major losses to the national interests, it constitutes a crime. For private enterprises, if the person in charge directly responsible for them carries out the above-mentioned acts and causes significant losses to the company's interests, it also constitutes a crime. The person in charge who is directly responsible here generally refers to the senior management of the company or the person in charge who has certain direct management positions.
In general, the 12th Amendment to the Criminal Law clearly stipulates the liability of directors, supervisors, senior executives and even ordinary staff of the company for criminal violations from the perspective of corporate governance. In fact, we can see from the expression of the amendment that the above provisions are not only applicable to the type of corporate organization, but also to other types of enterprises that are not companies. From the perspective of the type of corporate organizational structure, such provisions are of great significance for standardizing corporate governance, cracking down on infringement of corporate interests, and protecting the legitimate rights and interests of creditors.