China Corporate Criminal Liability: Compliance Programs for Multinationals

How unit liability works: the dual-punishment rule

Article 30 of the Criminal Law provides that a company, enterprise, institution, organ or organization that commits an act harmful to society, where the law so provides for unit crime, bears criminal liability. Article 31 then sets the default: for a unit crime, the unit is fined and the directly responsible persons in charge and other directly responsible persons are punished — the "dual punishment" rule — subject to any other provision of the law. That reservation matters: for a minority of unit crimes the law punishes only the directly responsible individuals, so "unit crime always means fine plus individual punishment" is not quite right.

Equally important is that unit crime exists only where a specific article provides for it. A company cannot commit theft, robbery or murder, and for crimes like loan fraud (Article 193) the law does not provide for unit liability — the individuals are prosecuted as natural persons instead.

The offenses that most often reach multinationals

• Unit bribery (Article 393) — giving bribes in the name of, and for the benefit of, the unit.
• Falsely issuing VAT special invoices (Article 205) and falsely issuing other invoices (Article 205-1) — a high-frequency risk where procurement or reimbursement controls are weak.
• Smuggling ordinary goods and articles (Article 153) — misdeclaring value, origin or classification to evade duty.
• Trademark counterfeiting (Article 213) and selling counterfeit goods (Article 214) — a risk for both manufacturing and sourcing operations.
• Copyright infringement (Article 217) and trade-secret infringement (Article 219, with unit liability under Article 220).
• Environmental pollution (Article 338, with unit liability under Article 346) — increasingly prosecuted, and increasingly used to reach management.

Two structural limits are worth knowing. First, where a company is set up specifically to carry out criminal activity, or where it engages primarily in crime after establishment, it is not treated as a unit crime — the Supreme People's Court's 1999 interpretation (Fa Shi [1999] No. 14) directs that the individuals are prosecuted as natural persons. Second, "directly responsible persons in charge" and "other directly responsible persons" are identified by decision, execution and benefit, so the test reaches beyond the person who physically did the act.

The compliance lever: what a program can actually do

Since March 2020, the Supreme People's Procuratorate has run a pilot program for corporate compliance in criminal cases — launched in six grassroots procuratorates and since expanded nationwide. In June 2021 the SPP and eight other departments issued the Guiding Opinions on Establishing a Third-Party Supervision and Evaluation Mechanism for Compliance of Enterprises Involved in Cases. Under it, in unit-crime cases where the enterprise pleads guilty and accepts punishment, a third-party supervisory organization assesses the company's compliance remediation; where the remediation passes, the procuratorate may make a relative non-prosecution decision or propose a more lenient sentence.

Be precise about what this is and is not. A compliance program is currently a discretionary ground for leniency — for a relative non-prosecution under Article 177(2) of the Criminal Procedure Law and for a sentencing recommendation — not a statutory defense written into the Criminal Law or the Criminal Procedure Law. "Compliance non-prosecution" is a procuratorial policy and pilot, not yet a legislative rule. A program therefore does not guarantee non-prosecution; it is the difference between a prosecutor seeing a systematic offender and seeing a company that failed once and fixed itself.

What makes a program "genuine" — and not paper compliance

• It addresses the actual root cause. A bribery case requires real controls over gifts, intermediaries and reimbursement; a smuggling case requires real customs-classification and valuation governance. A generic code of conduct is not remediation.
• It has teeth at the top. The persons responsible must be held accountable — a program that shields the decision-makers who caused the offense is treated as cosmetic.
• It passes third-party scrutiny. The supervisory organization looks at whether the program is actually implemented, funded and monitored, not just documented. Paper compliance is exactly what the mechanism is designed to catch.
• It is proportionate. Small enterprises are not expected to replicate a multinational's apparatus, but the commitment must be real.

A practical roadmap for multinationals

• Map the exposure. Identify which unit-crime provisions your China operations could touch — bribery, invoices, smuggling, IP, environment — and where the decision points are.
• Design controls at the decision points. Compliance that lives where the decisions are made, rather than in a training module, is what holds up.
• React fast if something happens. Early disclosure, cooperation and a genuine remediation plan are the strongest inputs into a relative non-prosecution decision.
• Use counsel early. The window between an investigation becoming known and the decision on prosecution is short. Our criminal defense team advises companies and individuals through investigations, and our guide for foreign nationals covers the detention and arrest process when individuals are involved.

The compliance-pilot framework is still developing and is subject to the latest SPP guidance, so confirm the current rules and any operative documents before relying on a particular mechanism. The direction of travel is clear, though: Chinese prosecutors are asking the question "did this company build a real program, and does it work?" — and the answer increasingly decides the outcome.