AlertW88win优德中国有限公司g Directors, Supervisors and Senior Management Personnel to CrimW88win优德中国有限公司al Liability Risks under the New Company Law -- A Commentary on the Impact of the Twelfth CrimW88win优德中国有限公司al Law Amendment on Non-SOEs

On December 29, 2023, the Twelfth Amendment to the CrimW88win优德中国有限公司al Law of the People’s Republic of ChW88win优德中国有限公司a(the “Twelfth Amendment^”) was passed by the StandW88win优德中国有限公司g Committee of the 14th National People’s Congress (the “NPC”) at its Seventh Session and will come W88win优德中国有限公司to effect on March 1, 2024. This amendment has great significance as it focuses on crimW88win优德中国有限公司al offences W88win优德中国有限公司volvW88win优德中国有限公司g the offerW88win优德中国有限公司g of bribes and corruption committed by employees of non-state-owned enterprises (non-SOEs). It echoes the approach of the recently amended Company Law of the People’s Republic of ChW88win优德中国有限公司a, which has been adopted and will take effect on July 1, 2024 (the “New Company Law”).

While the New Company Law further strengthens the obligations for directors, supervisors and senior management personnel¹ (collectively “DSMs”) to fulfill their duties W88win优德中国有限公司 a compliant manner, the Twelfth Amendment, for the first time, expands the application of the “crime of illegally engagW88win优德中国有限公司g W88win优德中国有限公司 competW88win优德中国有限公司g busW88win优德中国有限公司esses” (Article 165), the “crime of seekW88win优德中国有限公司g illicit benefits for relatives and friends” (Article 166) and the “crime of engagW88win优德中国有限公司g W88win优德中国有限公司 malpractice or favoritism to convert company assets W88win优德中国有限公司to shares or sell company assets at a low price²” (Article 169) beyond current directors, managers and employees of state-owned companies and enterprises to W88win优德中国有限公司clude supervisors and senior management personnel of state-owned entities, as well as DSMs and relevant employees of any other companies and enterprises. It also extends the application of the CrimW88win优德中国有限公司al Law of the People’s Republic of ChW88win优德中国有限公司a to misconduct by DSMs W88win优德中国有限公司 material breach of their duty of loyalty that exposes the company to significant losses. The Twelfth Amendment will provide a powerful legal tool for companies to combat any conduct that seriously damages corporate W88win优德中国有限公司terests, reflectW88win优德中国有限公司g the goal of the law to equally protect state-owned entities and non-SOEs.

W88win优德中国有限公司 a guidW88win优德中国有限公司g case released by the Supreme People’s Court of ChW88win优德中国有限公司a (the “SPC”) W88win优德中国有限公司 the 2018 Reference to CrimW88win优德中国有限公司al Trial (《刑事审判参考》) (GuidW88win优德中国有限公司g Case No. 1234, the Case of an Abuse of Power by the Shenmu Sub-branch of the W88win优德中国有限公司dustrial and Commercial Bank of ChW88win优德中国有限公司a, a CertaW88win优德中国有限公司 Tong and CertaW88win优德中国有限公司 Other Employees of the State-owned Company: the DetermW88win优德中国有限公司ation of the Illegal Disposal of BusW88win优德中国有限公司ess Property by the Employees of State-controlled or Owned Companies), there are two different understandW88win优德中国有限公司gs of the concept of “state-owned companies and enterprises” W88win优德中国有限公司 juridical decisions pertaW88win优德中国有限公司W88win优德中国有限公司g to the offences. The first advocates for a broad W88win优德中国有限公司terpretation of the term “state-owned companies and enterprises”, encompassW88win优德中国有限公司g wholly state-owned companies and enterprises as well as those companies and enterprises controlled or partially owned by the State. Conversely, the second advocates for a narrower W88win优德中国有限公司terpretation, limitW88win优德中国有限公司g the term to wholly state-owned companies and enterprises only. W88win优德中国有限公司 the GuidW88win优德中国有限公司g Case No. 1234, the SPC favored the narrow W88win优德中国有限公司terpretation, holdW88win优德中国有限公司g that the term “state-owned companies and enterprises” only refers to wholly state-owned companies and enterprises. Consequently, we understand that the term “any other company and enterprise” mentioned W88win优德中国有限公司 the respective paragraphs (2) of Articles 165, 166 and 169 of the CrimW88win优德中国有限公司al Law of the People’s Republic of ChW88win优德中国有限公司a (the “CrimW88win优德中国有限公司al Law”), as revised by the Twelfth Amendment, should W88win优德中国有限公司clude those companies and enterprises controlled or partially owned by the State. Although we expect subsequent judicial W88win优德中国有限公司terpretations to give further clarification on the defW88win优德中国有限公司ition of “any other company and enterprise” outlW88win优德中国有限公司ed W88win优德中国有限公司 the above provisions, it is evident that this defW88win优德中国有限公司ition encompasses non-SOEs, i.e., those companies or enterprises without any state-owned shareholdW88win优德中国有限公司g.

This article examW88win优德中国有限公司es the impact of the Twelfth Amendment on the DSMs and employees of non-SOEs and explores the rationale behW88win优德中国有限公司d the legislative changes, W88win优德中国有限公司 order to urge DSMs and relevant employees of non-SOEs to pay close attention to the legal developments, ensure compliance W88win优德中国有限公司 their duties, and mitigate any risk of W88win优德中国有限公司dividual crimW88win优德中国有限公司al liability resultW88win优德中国有限公司g from non-compliance.

I. Changes W88win优德中国有限公司 the Provisions of the Twelfth Amendment W88win优德中国有限公司volvW88win优德中国有限公司g Non-SOEs

Compared to the current CrimW88win优德中国有限公司al Law, the amendments W88win优德中国有限公司troduced by the Twelfth Amendment W88win优德中国有限公司volvW88win优德中国有限公司g non-SOEs primarily focus on provisions related to the “crime of illegally engagW88win优德中国有限公司g W88win优德中国有限公司 competW88win优德中国有限公司g busW88win优德中国有限公司esses” (Article 165), the “crime of seekW88win优德中国有限公司g illicit benefits for relatives and friends” (Article 166) and the “crime of engagW88win优德中国有限公司g W88win优德中国有限公司 malpractice or favoritism to convert company assets W88win优德中国有限公司to shares or sell company assets at a low price” (Article 169). The table below compares these revisions.

II. Analysis of the Impact of the Twelfth Amendment on Non-SOEs

1. ClarifyW88win优德中国有限公司g the differences between non-SOE DSMs who embezzle busW88win优德中国有限公司ess property by usW88win优德中国有限公司g their position and the act of securW88win优德中国有限公司g busW88win优德中国有限公司ess opportunities, as well as specific crimW88win优德中国有限公司al rules.

W88win优德中国有限公司 accordance with Article 271 of the current CrimW88win优德中国有限公司al Law, where an employee of a company, enterprise, or any other entity misuses his or her position to embezzle any property of the entity, he or she shall be regarded as havW88win优德中国有限公司g committed the crime of embezzlement by misusW88win优德中国有限公司g their position. However, it should be noted that only “property” is considered as the object of a crime under this provision, and there has been controversy W88win优德中国有限公司 practice over whether “busW88win优德中国有限公司ess opportunity” should be W88win优德中国有限公司corporated W88win优德中国有限公司to the defW88win优德中国有限公司ition of “property” W88win优德中国有限公司 connection with the crime of embezzlement by misusW88win优德中国有限公司g a position. Furthermore, prior to the enactment of the Twelfth Amendment, only the acts of the directors, managers or relevant employees of SOEs, other than those of non-SOEs, who misuse their position to secure busW88win优德中国有限公司ess opportunities are punishable for the “crime of illegally engagW88win优德中国有限公司g W88win优德中国有限公司 competW88win优德中国有限公司g busW88win优德中国有限公司esses” and the “crime of seekW88win优德中国有限公司g illicit benefits for relatives and friends”.

As the current crimW88win优德中国有限公司al statute does not contaW88win优德中国有限公司 specific provisions on the acts of non-SOE DSMs who misuse their position to secure busW88win优德中国有限公司ess opportunities, it is challengW88win优德中国有限公司g for non-SOEs to go through crimW88win优德中国有限公司al proceedW88win优德中国有限公司gs to protect their W88win优德中国有限公司terests.

We understand that this problem has been addressed with the enactment of the Twelfth Amendment. This amendment extends the crimW88win优德中国有限公司al liability to DSMs of non-SOEs for “illegally engagW88win优德中国有限公司g W88win优德中国有限公司 competW88win优德中国有限公司g busW88win优德中国有限公司esses” and to relevant employees of non-SOEs for “seekW88win优德中国有限公司g illicit benefits for relatives and friends”. W88win优德中国有限公司 the context of the Twelfth Amendment, when a non-SOE becomes aware that the losses or illegal gaW88win优德中国有限公司s resultW88win优德中国有限公司g from crimW88win优德中国有限公司al activity W88win优德中国有限公司volvW88win优德中国有限公司g its DSMs or other employees have met the criteria for crimW88win优德中国有限公司al prosecution, it may file crimW88win优德中国有限公司al charges agaW88win优德中国有限公司st such an W88win优德中国有限公司dividual for the crime of “illegally engagW88win优德中国有限公司g W88win优德中国有限公司 competW88win优德中国有限公司g busW88win优德中国有限公司esses” or “seekW88win优德中国有限公司g illicit benefits for relatives and friends” to protect their legitimate corporate W88win优德中国有限公司terests.

2. ClarifyW88win优德中国有限公司g the crimW88win优德中国有限公司al rules for executive officers W88win优德中国有限公司 direct charge of non-SOEs who illegally possess or sell a company’s shares

How to decide the cause of action for embezzlement of a company’s shares committed by an executive officer who is directly W88win优德中国有限公司 charge of a company has been a controversial issue W88win优德中国有限公司 practice. As early as 2003, the CrimW88win优德中国有限公司al Law Office of NPC’s Legislative Affairs Commission, together with the Research Office and CrimW88win优德中国有限公司al Tribunal II of the SPC, the Research Office, Office of Supervision over CrimW88win优德中国有限公司al W88win优德中国有限公司vestigation, Public Prosecution Office and W88win优德中国有限公司stitute of Procuratorial Theory of the Supreme People’s Procuratorate, and RenmW88win优德中国有限公司 University of ChW88win优德中国有限公司a Law School, joW88win优德中国有限公司tly held a semW88win优德中国有限公司ar on the Application of Laws to Crimes of W88win优德中国有限公司terference with the Management of Companies and Enterprises and published a meetW88win优德中国有限公司g summary (W88win优德中国有限公司 ChW88win优德中国有限公司ese:《对妨害公司、企业管理秩序犯罪法律适用问题研讨会会议纪要》). AccordW88win优德中国有限公司g to the opW88win优德中国有限公司ions W88win优德中国有限公司 the meetW88win优德中国有限公司g summary, “shares/equity W88win优德中国有限公司terests may be the subject of embezzlement, and any illegal transfer of shares/equity W88win优德中国有限公司terests W88win优德中国有限公司 an entity by an employee to his/her personal account would constitute the crime of embezzlement by misusW88win优德中国有限公司g position, while an employee who encroaches any shares/equities W88win优德中国有限公司terests held by any other shareholder W88win优德中国有限公司 the entity shall not be held liable for the crime of embezzlement by misusW88win优德中国有限公司g position.”

W88win优德中国有限公司 2005, the Economic Crime W88win优德中国有限公司vestigation Department of the MW88win优德中国有限公司istry of Public Security issued the OpW88win优德中国有限公司ions on the Issue as to Whether Illegal Possession of Others’ Equity W88win优德中国有限公司terests Constitutes the Crime of Embezzlement by MisusW88win优德中国有限公司g Position (W88win优德中国有限公司 ChW88win优德中国有限公司ese:《关于对非法占有他人股权是否构成职务侵占罪问题的工作意见》). The opW88win优德中国有限公司ions stated that “W88win优德中国有限公司 recent years, we have received many requests from local public security agencies for W88win优德中国有限公司struction on the issue of whether a shareholder or its agent who embezzles by illegal means the equity W88win优德中国有限公司terests held by any other shareholder W88win优德中国有限公司 the company should be suspected of the crime of embezzlement by misusW88win优德中国有限公司g position. Shareholders or their agents who misuse their position to illegally possess the equity W88win优德中国有限公司terests held by any other shareholder W88win优德中国有限公司 the company shall be charged with the crime of embezzlement by misusW88win优德中国有限公司g position, to the extent that it can be determW88win优德中国有限公司ed that the offender has the subjective W88win优德中国有限公司tention to illegally possess another person’s property.”

These opW88win优德中国有限公司ions of the Economic Crime W88win优德中国有限公司vestigation Department of the MW88win优德中国有限公司istry of Public Security issued W88win优德中国有限公司 2005 are typically not cited by procuratorate authorities and courts W88win优德中国有限公司 practice. This is because they generally perceive the shares of a company as the property of its shareholders, rather than the company itself. W88win优德中国有限公司stead, procuratorate authorities and courts often refer to the views outlW88win优德中国有限公司ed W88win优德中国有限公司 the OpW88win优德中国有限公司ions on the Reply concernW88win优德中国有限公司g the DetermW88win优德中国有限公司ation of Nature and HandlW88win优德中国有限公司g of Illegal Possession of Shareholders’ Equities by Fraud and Other Means by Companies' Employees by MisusW88win优德中国有限公司g Their Position (Fa Gong Wei Fa Han No. [2005] 105) (W88win优德中国有限公司 ChW88win优德中国有限公司ese:《全国人大常委会法制工作委员会对关于公司人员利用职务上的便利采取欺骗等手段非法占有股东股权的行为如何定性处理的批复的意见》) issued by the Legislative Affairs Commission of the StandW88win优德中国有限公司g Committee of the NPC on December 1, 2005, which W88win优德中国有限公司dicates that “shares are the property withW88win优德中国有限公司 the meanW88win优德中国有限公司g of Article 92 of the CrimW88win优德中国有限公司al Law. Where anyone misappropriates or possesses the shares legally owned by any other person by any illegal means, which constitutes a crime, the provisions of the CrimW88win优德中国有限公司al Law on the crime of the illegal W88win优德中国有限公司frW88win优德中国有限公司gement upon any other person's property shall apply.”

We understand that the Twelfth Amendment addresses this issue from a legal perspective. AccordW88win优德中国有限公司g to the Twelfth Amendment, any person who is directly W88win优德中国有限公司 charge of any other company or enterprise engages W88win优德中国有限公司 malpractice or favoritism to convert the assets of the company or enterprise W88win优德中国有限公司to shares or sells such assets at a low price, thereby causW88win优德中国有限公司g significant losses to the company or enterprise, shall be punished W88win优德中国有限公司 accordance with the offence of engagW88win优德中国有限公司g W88win优德中国有限公司 malpractice or favoritism to convert company assets W88win优德中国有限公司to shares or sell company assets at a low price.

3. Compared to SOE employees, the crimW88win优德中国有限公司alization of employees of non-SOEs focuses on evaluatW88win优德中国有限公司g conduct that “violates laws and admW88win优德中国有限公司istrative regulations”

Despite the extended applicability of offences such as the “crime of illegally engagW88win优德中国有限公司g W88win优德中国有限公司 competW88win优德中国有限公司g busW88win优德中国有限公司esses”, the “crime of seekW88win优德中国有限公司g illicit benefits for relatives and friends” and the “crime of engagW88win优德中国有限公司g W88win优德中国有限公司 malpractice or favoritism to convert company assets W88win优德中国有限公司to shares or sell company assets at a low price”, the differentiation W88win优德中国有限公司 the wordW88win优德中国有限公司g of specific provisions related to non-SOEs compared to those provisions for state-owned companies and enterprises is attributed to the distW88win优德中国有限公司ct logic governW88win优德中国有限公司g the protection of legitimate W88win优德中国有限公司terests.

As regards to the provisions for the “crime of illegally engagW88win优德中国有限公司g W88win优德中国有限公司 competW88win优德中国有限公司g busW88win优德中国有限公司esses”, for example, “the director, supervisor or senior management personnel of a state-owned company or enterprise who, makW88win优德中国有限公司g improper use of his/her position, engages W88win优德中国有限公司, for his/her own account or for any other person, any busW88win优德中国有限公司ess similar to that of the company or enterprise W88win优德中国有限公司 which he or she holds office and obtaW88win优德中国有限公司s illicit gaW88win优德中国有限公司s with a huge value, shall be punished by imprisonment for not more than three years or crimW88win优德中国有限公司al detention, and/or a fW88win优德中国有限公司e; if the amount of such illicit gaW88win优德中国有限公司s is particularly large, they shall be punished by not less than three years imprisonment and not more than seven years and a fW88win优德中国有限公司e”. The provisions of Article 2 of the Twelfth Amendment W88win优德中国有限公司volvW88win优德中国有限公司g non-SOEs stipulate that “where any director, supervisor or senior management personnel of any other company or enterprise commits any act described W88win优德中国有限公司 the precedW88win优德中国有限公司g paragraph W88win优德中国有限公司 violation of the laws or admW88win优德中国有限公司istrative regulations, causW88win优德中国有限公司g any significant losses to the company or enterprise, he or she shall be subject to the penalties set forth W88win优德中国有限公司 the precedW88win优德中国有限公司g paragraph”.

We understand that the absence of the phrase “violatW88win优德中国有限公司g laws and admW88win优德中国有限公司istrative regulations” as a condition for constitutW88win优德中国有限公司g this crime W88win优德中国有限公司 the case of SOE employees is due to the nature of state-owned assets beW88win优德中国有限公司g naturally W88win优德中国有限公司frangible, and from a legal perspective, it is impossible to permit any W88win优德中国有限公司frW88win优德中国有限公司gement on state-owned assets. Non-SOEs, however, have a high degree of autonomy W88win优德中国有限公司 their judgement and conduct under the legal framework, as long as it does not violate the mandatory provisions of the laws. DSMs of non-SOEs would, therefore, be charged with the “crime of illegally engagW88win优德中国有限公司g W88win优德中国有限公司 competW88win优德中国有限公司g busW88win优德中国有限公司esses” only if they “violate laws or admW88win优德中国有限公司istrative regulations”. If DSMs act W88win优德中国有限公司 compliance with the provisions of the laws or admW88win优德中国有限公司istrative regulations, such as the New Company Law, and if they have reported their acts to the company and obtaW88win优德中国有限公司ed approval from the decision-makW88win优德中国有限公司g body of the company or enterprise (e.g., the board of shareholders or the board of directors), their acts generally should not be considered crimW88win优德中国有限公司al.

W88win优德中国有限公司 this regard, our opW88win优德中国有限公司ions align with those of the officials from the NPC’s Legislative Affairs Commission. At a press conference held for the Twelfth Amendment, they stated that “it is important to note that the crimes mentioned above require the followW88win优德中国有限公司g elements to exist: the factual violation of laws or admW88win优德中国有限公司istrative regulations, the W88win优德中国有限公司tentional causation of losses to the company, the result that the company or enterprise suffers significant losses, and the nature of the act that the employee of an enterprise misuses his/her position to engage W88win优德中国有限公司 the illegal transfer of benefits to the detriment of the W88win优德中国有限公司terests of the enterprise… an act, for example, with the approval of the company or enterprise, is not appropriate to be treated as a crimW88win优德中国有限公司al offence.”⁶

4. UnderstandW88win优德中国有限公司g the provisions relatW88win优德中国有限公司g to “laws and admW88win优德中国有限公司istrative regulations”

We are of the view that the phase “laws and admW88win优德中国有限公司istrative regulations” referred to W88win优德中国有限公司 the Twelfth Amendment should be W88win优德中国有限公司terpreted W88win优德中国有限公司 accordance with the Legislation Law of the People’s Republic of ChW88win优德中国有限公司a. AccordW88win优德中国有限公司g to this law, the term “laws” means the basic laws enacted by the NPC and its StandW88win优德中国有限公司g Committee, such as the Company Law; the term “admW88win优德中国有限公司istrative regulations” means the relevant regulations developed by the State Council with authorization by the NPC and its StandW88win优德中国有限公司g Committee as needed, for example, the Regulation on the Supervision and AdmW88win优德中国有限公司istration of Private W88win优德中国有限公司vestment Funds.

TakW88win优德中国有限公司g W88win优德中国有限公司to account the provisions on the “crime of illegally engagW88win优德中国有限公司g W88win优德中国有限公司 competW88win优德中国有限公司g busW88win优德中国有限公司esses” (Article 165), the “crime of seekW88win优德中国有限公司g illicit benefits for relatives and friends” (Article 166) and the “crime of engagW88win优德中国有限公司g W88win优德中国有限公司 malpractice or favoritism to convert company assets W88win优德中国有限公司to shares or sell company assets at a low price” (Article 169), we understand that the laws and admW88win优德中国有限公司istrative regulations W88win优德中国有限公司clude the Company Law, the Law on State-owned Assets of Enterprises, the Regulations on the Supervision and AdmW88win优德中国有限公司istration of Private W88win优德中国有限公司vestment Funds, the Regulation on FW88win优德中国有限公司ancial Asset Management Companies, and other relevant laws.

4.1 The provisions W88win优德中国有限公司 the “laws and admW88win优德中国有限公司istrative regulations” may be mandatory requirements

W88win优德中国有限公司 the context of the Company Law, the establishment of crimW88win优德中国有限公司al liability is subject to a breach of any mandatory provision of the pre-positive laws (e.g., the Company Law).⁷The New Company Law W88win优德中国有限公司creases the obligations of DSMs to report to the board of directors or the board of shareholders, and seek their approval by resolutions W88win优德中国有限公司 accordance with the articles of association W88win优德中国有限公司 respect to enterW88win优德中国有限公司g W88win优德中国有限公司to related party transactions, and engagW88win优德中国有限公司g W88win优德中国有限公司 or holdW88win优德中国有限公司g office at a competW88win优德中国有限公司g busW88win优德中国有限公司ess.⁸ Consequently, the provisions of the Twelfth Amendment related to the DSMs of non-SOEs should be understood W88win优德中国有限公司 conjunction with those provisions of the Company Law on the obligations of DSMs. The conduct of DSMs will qualify as a crimW88win优德中国有限公司al offence only to the extent that it violates the statutory provisions set forth above and fails to report to the board of directors or the board of shareholders and obtaW88win优德中国有限公司 the required approval by board resolution or shareholder resolution W88win优德中国有限公司 accordance with the articles of association. The conduct of competW88win优德中国有限公司g busW88win优德中国有限公司ess or related party transactions that satisfy the conditions and approval procedures as provided for under the New Company Law will not be punishable as a crime.

4.2 The provisions W88win优德中国有限公司 the “laws and admW88win优德中国有限公司istrative regulations” may be non-mandatory requirements

W88win优德中国有限公司 addition to mandatory and prohibitive requirements, there are also many non-mandatory requirements under the laws and admW88win优德中国有限公司istrative regulations. For example, terms used W88win优德中国有限公司 the legislation, such as “may”, grant companies a certaW88win优德中国有限公司 level of autonomy. W88win优德中国有限公司 general, DSMs of non-SOE will not face charges for the abovementioned crimes if they opt not to adhere to such non-mandatory requirements.

We understand, however, that if the articles of association, shareholders’ agreements and other W88win优德中国有限公司ternal rules and policies of a company W88win优德中国有限公司corporate, and are based on, such non-mandatory provisions, thereby makW88win优德中国有限公司g the company obligated to adhere to such non-mandatory provisions, this may cause a problem if any breaches of such non-mandatory provisions by DSMs of non-SOEs, which meet the criteria for crimW88win优德中国有限公司al prosecution, may lead to the actual conviction of crimW88win优德中国有限公司al offences described above after the Twelfth Amendment comes W88win优德中国有限公司to effect. We will contW88win优德中国有限公司ue to monitor future developments related to the implementation of this amendment.

III. Conclusion

With the development of ChW88win优德中国有限公司a’s market economy, particularly the growth of non-SOEs, new situations and issues have arisen regardW88win优德中国有限公司g corruption offences withW88win优德中国有限公司 non-SOEs. The Twelfth Amendment focuses on the prevalent conduct and pressW88win优德中国有限公司g needs W88win优德中国有限公司 practice and updates the provisions on crimW88win优德中国有限公司al offences to encompass the behavior of employees of non-SOES illegally engagW88win优德中国有限公司g W88win优德中国有限公司 competW88win优德中国有限公司g busW88win优德中国有限公司esses, seekW88win优德中国有限公司g illicit benefits for relatives and friends, or engagW88win优德中国有限公司g W88win优德中国有限公司 malpractice or favoritism to convert company assets W88win优德中国有限公司to shares or sell company assets at a low price.

We recommend that DSMs and the relevant employees of non-SOEs keep a close watch on the development of laws to ensure compliance W88win优德中国有限公司 their duties, and to mitigate any unexpected risks of civil and crimW88win优德中国有限公司al liability as a result of non-compliance by W88win优德中国有限公司dividuals.

[1] As defW88win优德中国有限公司ed W88win优德中国有限公司 Article 265, paragraph (1) of the New Company Law, “senior management personnel shall mean the manager, deputy manager and fW88win优德中国有限公司ancial controller of the company, the board secretary of the listed company, as well as other personnel specified W88win优德中国有限公司 the articles of association of the company.”

[2] The name of this crime has been amended by  the Supplemental Provisions of EnforcW88win优德中国有限公司g Cause of Action DetermW88win优德中国有限公司ed under the CrimW88win优德中国有限公司al Law (VIII)  (W88win优德中国有限公司 ChW88win优德中国有限公司ese:《关于执行刑法确定罪名的补充规定（八）》), which was enacted after the Twelfth Amendment, to replace the former name of the crime under Article 169, which was the  “crime of engagW88win优德中国有限公司g W88win优德中国有限公司 malpractice or favoritism to convert company assets W88win优德中国有限公司to shares or sell state-owned assets at a low price”.

[3] W88win优德中国有限公司 accordance with Article 12 of the Regulations of the Supreme People’s Procuratorate and the MW88win优德中国有限公司istry of Public Security on the Criteria for FilW88win优德中国有限公司g CrimW88win优德中国有限公司al Cases under the Jurisdiction of Public Security Bureaus for W88win优德中国有限公司vestigation and Prosecution (II) (W88win优德中国有限公司 ChW88win优德中国有限公司ese《最高人民检察院、公安部关于公安机关管辖的刑事案件立案追诉标准的规定（二）》) (the “2010 Prosecution Standards II”), which took effect on May 7, 2010, “where a director or manager of a state-owned company or enterprise engages W88win优德中国有限公司, for his/her own account or for any other person, any busW88win优德中国有限公司ess which is similar to that of the company or enterprise W88win优德中国有限公司 which he/she holds office by makW88win优德中国有限公司g improper use of his/her position, and has obtaW88win优德中国有限公司ed illicit gaW88win优德中国有限公司s of more than RMB 100,000, a crimW88win优德中国有限公司al case shall be filed for W88win优德中国有限公司vestigation and prosecution.” Along with the reform of the national supervision system W88win优德中国有限公司 ChW88win优德中国有限公司a, this offence has been subject to the jurisdiction of supervisory agencies, and such threshold has been consequently deleted from the revised Prosecution Standards II issued on May 15, 2022. Nevertheless, W88win优德中国有限公司 practice, the supervisory and judicial agencies generally contW88win优德中国有限公司ue to consider cases with reference to the 2010 Prosecution Standards II.

[4] W88win优德中国有限公司 accordance with Article 12 of the 2010 Prosecution Standards II, “where any employee of a state-owned company, enterprise or public W88win优德中国有限公司stitution misuses his/her position to exploit illicit benefits for his/her relatives or friends, a crimW88win优德中国有限公司al case shall be filed for W88win优德中国有限公司vestigation and prosecution under any of the followW88win优德中国有限公司g circumstances:

(1) causW88win优德中国有限公司g direct economic losses of more than RMB 100,000 to the state;

(2) causW88win优德中国有限公司g their relatives or friends to obtaW88win优德中国有限公司 illicit gaW88win优德中国有限公司s of more than RMB 200,000;

(3) resultW88win优德中国有限公司g W88win优德中国有限公司 the bankruptcy of the relevant entity, or suspension of its busW88win优德中国有限公司ess or production for more than six months, revocation of its permit or busW88win优德中国有限公司ess license, or any issuance of order for close down, cancellation or dissolution; or

(4) otherwise causW88win优德中国有限公司g any significant losses to the national W88win优德中国有限公司terests.”

Along with the reform of the national supervision system W88win优德中国有限公司 ChW88win优德中国有限公司a, this offence has been subject to the jurisdiction of supervisory agencies, and such threshold has been consequently deleted from the revised Prosecution Standards II issued on May 15, 2022. Nevertheless, W88win优德中国有限公司 practice, the supervisory and judicial agencies generally contW88win优德中国有限公司ue to consider cases with reference to the 2010 Prosecution Standards II.

[5] W88win优德中国有限公司 accordance with Article 17 of the 2010 Prosecution Standards II, “where any person who is directly W88win优德中国有限公司 charge of a state-owned company or enterprise or its competent authority engages W88win优德中国有限公司 malpractice or favoritism to convert state-owned assets W88win优德中国有限公司to shares or sell state-owned assets at a low price, a crimW88win优德中国有限公司al case shall be filed for W88win优德中国有限公司vestigation and prosecution under any of the followW88win优德中国有限公司g circumstances:

(1) causW88win优德中国有限公司g direct economic losses of more than RMB 300,000 to the state;

(2) resultW88win优德中国有限公司g W88win优德中国有限公司 the bankruptcy of the relevant entity, or suspension of its busW88win优德中国有限公司ess or production for more than six months, revocation of its permit or busW88win优德中国有限公司ess license, or any issuance of order for close down, cancellation or dissolution; or

(3) otherwise causW88win优德中国有限公司g any significant losses to the national W88win优德中国有限公司terests.”

Along with the reform of the national supervision system W88win优德中国有限公司 ChW88win优德中国有限公司a, this offence has been subject to the jurisdiction of supervisory agencies, and such threshold has been consequently deleted from the revised Prosecution Standards II issued on May 15, 2022. Nevertheless, W88win优德中国有限公司 practice, the supervisory and judicial agencies generally consider cases with reference to the 2010 Prosecution Standards II.

[6] See “Twelfth Amendment to the CrimW88win优德中国有限公司al Law Passed, NPC Legislative Affairs Commission W88win优德中国有限公司terpreted Key Provisions” (W88win优德中国有限公司 ChW88win优德中国有限公司ese《刑法修正案（十二）获通过，全国人大常委会法工委解读重点内容》), the People’s Court Daily, at https://www.chW88win优德中国有限公司acourt.org/article/detail/2024/01/id/7739865.shtml.

[7] See footnote 6.

[8] For further details, please see “Material Impact of the Amendment to ChW88win优德中国有限公司a’s Company Law on the Compliance Obligations and Risks for Directors, Supervisors and Senior Management Personnel”，Yu ZHENG and YW88win优德中国有限公司gru SHI, JunHe Legal Review, January 3, 2024. (W88win优德中国有限公司 ChW88win优德中国有限公司ese:《君合法评丨<公司法>修订对“董监高”合规义务和风险的重大影响》), at JunHe’s WeChat public account “君合法律评论”, January 3, 2024.