Short answer: yes. Chinese criminal law treats a company as a unit that can itself be convicted, fined and recorded as a criminal offender, while the people who ran it go to prison. Article 30 of the Criminal Law provides that where a company, enterprise, institution, organ or organisation commits an act harmful to society and the law provides for unit crime, the unit bears criminal responsibility; Article 31 provides that the unit is fined and the persons directly in charge and other directly responsible persons are punished.
How a unit crime works
Two things decide whether prosecutors charge the company or only an individual. First, the conduct must be traceable to the unit, meaning it was decided or approved by its responsible persons. Second, the illegal benefit should flow to the unit rather than only into somebody’s pocket. If the money went to the manager personally, the charge is normally against the individual. If the company decided it, both are exposed: the entity to a fine, the individuals to imprisonment.
What the Criminal Law actually says
Article 393 covers unit bribery and was amended with effect from 1 March 2024: where a unit pays a bribe to obtain an improper benefit, or gives a state functionary a kickback or service fee in breach of state rules, and the circumstances are serious, the unit is fined and the persons directly in charge and other directly responsible persons receive up to three years of imprisonment or criminal detention plus a fine; where the circumstances are especially serious, the sentence is three to ten years plus a fine. Article 164, which punishes bribing an employee of another company or organisation, also applies to units and imposes a fine on the entity. Article 312 on concealing criminal proceeds contains the same unit clause. A company bank account that moved money for a crime is evidence, not a shield.
Practical points for foreign investors
First, incorporation is not protection: a wholly foreign-owned enterprise whose staff and account are used to bribe, launder or evade tax is the unit in the indictment. Second, the persons directly responsible are usually the country manager, the finance lead and the sales head who signed, not only the chairman. Third, exposure can survive a transaction: when you acquire a Chinese target, its historical conduct remains with the same legal person after closing, so criminal due diligence belongs inside the deal.
Scenario (hypothetical): the sales director of a foreign-invested company approves year-end consulting fees paid from the company account to procurement staff of a client, to keep the contract. The company is prosecuted as a unit and fined, and the director faces charges in his own name.
The point: assume a company can be prosecuted, assume its managers can be jailed, and remember that the approvals, invoices and bank transfers are the case.
FAQ
Q: Can a company be criminally liable in China?
A: Yes. Under Articles 30 and 31 of the Criminal Law a company can be convicted as a unit, fined, and have its directly responsible managers sentenced at the same time.
Q: Can a foreign-invested company commit a unit crime?
A: Yes. Liability attaches to the unit, so a wholly foreign-owned or joint venture entity can be the defendant if its responsible persons decided the conduct and the benefit went to the company.
Q: Who goes to prison in a unit crime?
A: The persons directly in charge and other directly responsible persons, which in practice means the managers and finance or sales staff who approved and carried out the conduct.
Q: What is the penalty for the company itself?
A: A fine on the entity. For unit bribery under Article 393 the responsible persons face up to three years, and three to ten years where the circumstances are especially serious.
Q: Does buying a Chinese company transfer its criminal exposure?
A: The company remains the same legal person after closing, so past conduct and enforcement exposure stay with it. Run criminal due diligence before signing, not after.
Wang Guan | Co-founder, Beijing Haolue Law Firm | +86 17813108512