Impact of the Latest Amendment to Criminal Law of the PRC on Company Management Staff
On 29 December 2023, the Amendment (XII) to the Criminal Law of the PRC has been adopted at the 7th Session of the Standing Committee of the Fourteenth National People's Congress of the PRC, which will come into force on 1 March 2024.
The Amendment (XII) to the Criminal Law clarifies for the first time that directors, supervisors, or senior management staff of non-state-owned enterprises may also commit and the following crimes:
crime of illegally operating similar businesses
crime of illegally profiting for family and friends
crime of irregularities for favoritism to convert company or enterprise assets into low-priced shares or to sell off the assets at low price
Prior to the above amendment, the behaviours of illegally operating similar businesses, illegally profiting for family and friends, or irregularities for favoritism to convert company or enterprise assets into low-priced shares or to sell off the assets at low prices that conducted by non-state-owned enterprise personnel were not defined as crimes in the Criminal Law. The new amendment undoubtedly toughens the punishment for the behaviours of the directors, supervisors, or senior management staff of non-state-owned enterprises that against their loyalty duties and non-competition stipulated by the Company Law. At the same time, it also provides a criminal remedy for companies or enterprises to crack down on serious infringement of their interests by internal personnel.
According to the Company Law of the PRC, the senior management staff refers to the manger, deputy manager, financial controller, secretary of the board of directors of a listed company, or any other persons stipulated in the articles of association of the company.
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