[Direct answer]In the Beijing area, after receiving a report, the company should proceed with an internal investigation according to five steps. The first step is to establish an investigation team, led by the legal or compliance department, and hire external lawyers if necessary. The members of the team should have no interest in the matters being reported. The second step is to clarify the scope of the investigation and authorizations, including access rights, interview rights, and conclusion issuance rights, to avoid conducting investigations beyond the scope. The third step is to preserve evidence in accordance with the law, promptly fixing contracts, accounts, emails, system logs, and chat records involved. It is important to pay attention to the original carriers and time information, and not just reiterate the content. The fourth step is to conduct separate interviews, taking care to avoid multiple people making joint statements and colluding afterward. The interview records should be confirmed by the interviewees. The fifth step is to form a written conclusion, clarifying the facts, responsibilities, and processing recommendations, and assessing whether there are criminal risks involved. It is particularly important to note that there are fundamental differences between internal investigation powers and investigative powers. Enterprises are not allowed to conduct forced searches, restrict personal freedom, or obtain evidence in improper ways. If clues suggesting possible crimes are found during the investigation, they should promptly report them to the case-handling authorities to avoid aggravating responsibilities due to delays in internal handling or cover-ups. The Criminal Law of the People's Republic of China (amended by the Ninth Amendment to the Criminal Law, which came into effect on November 1, 2015) and related provisions clearly regulate acts of obstructing justice and concealing evidence.Criminal defense and criminal case filingThe column provides specific guidance on how enterprises can address the risks of being involved in criminal cases.

I. Problem Background and Typical Scenarios

Companies seeking advice on such issues often face two scenarios: first, they receive reports from employees or external sources alleging fraud, corruption, false reimbursement, or collusion in procurement, and need to investigate the facts; second, they have already heard about internal problems but haven't received formal reports yet, fearing that starting an investigation too late might lead to the loss of evidence. There are four common challenges: first, the reports are vague and lack clear targets, which hampers efficient and comprehensive investigations; second, the individuals involved may share common interests, posing confidentiality risks for the investigation team; third, they worry that the investigation might cause panic or trigger resistance; fourth, they struggle to distinguish between issues that can be handled internally and those that must be referred to judicial authorities. In practice, the real determinants of success or failure are often not the investigation methods themselves, but whether the preliminary scope definition and evidence preservation are in place. Companies in the commercial field may also refer to this for compliance support needs.Business and contract disputes in enterprisesA column.

II. Key points of contention

Focus I: The scope of the investigation and the authorization boundaries—what extent can an internal corporate investigation achieve? Focus II: The legality and integrity of evidence preservation—how should original documents and electronic data be stored? Focus III: The independence of investigators and the avoidance of conflicts of interest. Focus IV: Protecting the rights of those under investigation—including the right to information, the right to defense, and the prevention of retaliation. Focus V: When and how should clues of suspected crimes be transferred, and the risk of false alerts. Focus VI: Labor relations management—whether to terminate employment contracts and the basis for such decisions. Focus VII: The evidentiary validity of investigation conclusions and their admissibility in subsequent legal proceedings. Focus VIII: The interface between internal investigations and external disclosures, as well as regulatory reporting. The specific rules outlined above are subject to the currently applicable laws, regulations, and judicial rulings.

III. Professional analysis by Henglue Law Firm

Based on our experience in handling corporate and criminal cases, the quality of internal investigations primarily depends on whether three preliminary actions are properly implemented. The first preliminary action is scope definition. Reports often contain both emotional descriptions and genuine clues. If these are not screened, the investigation may easily deviate from the main focus: on the one hand, reviewing all company accounts leads to low efficiency; on the other hand, investigating only the individuals or specific cases mentioned in the report may overlook real systemic risks. A professional approach is to first break down the report into four columns: factual claims, involved subjects, time periods, and evidence direction, and then use this to determine the investigation boundaries and priorities. The second preliminary action is evidence preservation. Electronic evidence is the most easily lost: chat records being deleted, email accounts being cleared, system logs being overwritten, and business contracts being replaced. Upon discovering the report, immediate preservation measures should be taken for relevant systems, with clear retention periods and responsible parties specified. Written records of preservation actions should be kept, and if necessary, evidence can be fixed through notarization or third-party storage methods. The third preliminary action is criminal risk isolation. Once clues indicating potential criminal activity are identified during internal investigations, two key matters must be clarified immediately: which materials should be transferred to law enforcement authorities, and which materials can continue to be used internally within the company; and whether professional lawyers are needed to assess the nature of the case. Treating civil disputes as criminal cases or handling criminal clues as ordinary disciplinary violations can lead to serious consequences. When handling such matters, our firm typically adopts a dual-track approach: conducting factual verification and disciplinary actions internally, while simultaneously conducting criminal risk assessments and procedural design by professional lawyers, ensuring that the two tracks do not interfere with each other but mutually support each other.

IV. Practical suggestions and legal basis

Action proposals: 1. Establish an independent investigation team and sign a confidentiality agreement; 2. Review the content of the report in writing, breaking it down into facts, subjects, time periods, and evidence; 3. Immediately preserve relevant electronic and paper evidence, clarify responsibilities, and maintain records; 4. Conduct separate interviews and prepare verified interview records; 5. Enlist professional lawyers to simultaneously assess criminal risks and procedural connections; 6. Report clues constituting crimes to law enforcement authorities in a timely manner; 7. Process findings in accordance with regulations, and pay attention to the basis and procedures for terminating labor contracts; 8. Unify the management of external disclosures and regulatory reports. Legal basis: - Provisions on obstruction of justice and concealment/fabrication of evidence in the Criminal Law of the People's Republic of China (amended by the Ninth Amendment to the Criminal Law, effective November 1, 2015); - Provisions on termination of labor contracts in the Labor Contract Law of the People's Republic of China (adopted on June 29, 2007, effective January 1, 2008); - Revised Anti-Unfair Competition Law of the People's Republic of China (amended in 2019, effective April 23, 2019); - Specific procedures for transferring criminal clues shall be subject to currently effective regulations.

5. Henglu Law Firm's Advice

First, the internal investigation authority is not an investigative power, and it is not allowed to take coercive measures or restrict personal freedom. Second, preserving electronic evidence requires prompt action. A delay of even one day may result in its permanent loss. Third, members of the investigation team should sign confidentiality agreements and receive anti-evasion reminders. Fourth, the order and methods of interviews can affect the reliability of conclusions, so it is necessary to avoid multiple people giving the same testimony and leading questions. Fifth, after discovering criminal clues, do not attempt to handle them internally, as this may lead to more serious problems. Sixth, the handling of the investigated parties should be based on clear facts and compliant procedures to avoid accusations of retaliation. Seventh, attention should be paid to preserving the confidentiality of whistleblower information and the investigation process to avoid secondary harm. Eighth, if it involves listed companies, state-owned enterprises, or government projects, it is also necessary to consider the connection between regulatory reports and disciplinary inspection procedures, and relevant procedural requirements can be referred to for reference.Special services and other casesThe instructions in the column. For the overall approach to building an enterprise legal advisor system, you can refer to it for reference.Intellectual property protection and corporate lawColumn.

VI. Frequently Asked Questions

Q1: Can we interview employees during an internal investigation, and are there any legal restrictions on this?

Yes, but it must not exceed a reasonable scope. During the internal investigation, the company may inquire relevant personnel to understand the situation, but it is not allowed to take coercive measures, restrict personal freedom, or obtain evidence in an improper manner. The interviews should be conducted individually and recorded truthfully, avoiding inducement and threats. The collection of personal information should follow the principles of necessity and appropriateness, and attention should be paid to protecting the legitimate rights and interests of the persons under investigation.

Q2: If an investigation reveals that an act may constitute a crime, what should be done?

It is necessary to report the case to the investigating authority in a timely manner, and at the same time, preserve the evidence and stop handling related matters internally. In practice, a common misunderstanding is trying to investigate internally first before deciding whether to report the case, which may either lead to delays or constitute concealment. It is recommended to immediately entrust a professional lawyer to evaluate the establishment of the crime and the status of the evidence after discovering clues, and then decide on the transfer method and cooperation plan.

Q3: If the content of the report is untrue, can the company hold the reporter accountable?

It is necessary to distinguish between fabricated facts and reports made in good faith. If the reporter knowingly fabricates facts, damages the company's reputation, and causes losses, he/she may bear corresponding legal responsibilities; but in cases where the report contains untrue information but is made in good faith, the law usually allows some tolerance. It is more prudent for enterprises to verify the information first and then deal with it, so as to avoid causing greater controversy due to retaliatory accountability.

Q4: Can the investigation conclusions be used as the basis for disciplinary action?

It can be used as a basis for internal disciplinary action, but it must meet the requirements of procedural fairness: clear facts, sufficient evidence, and compliance with procedures, and the parties must be given the opportunity to present their defenses. If the case may subsequently proceed to arbitration or litigation, the methods of obtaining the investigation materials and the content recorded will be reviewed. Improper methods of obtaining evidence may lead to conclusions that are not credible, and even trigger new legal risks.

Q5: If external lawyers participate in internal investigations, how can confidentiality be guaranteed?

Generally, confidentiality obligations and the scope of information use are specified in a retainer agreement, and lawyers are legally bound by confidentiality obligations. Within the enterprise, confidentiality commitments should be signed, the scope of knowledge should be limited, and document circulation should be regulated. It should be noted that in cases involving information disclosure of listed companies, regulatory inquiries, or state-owned asset supervision, there may be statutory disclosure obligations, and the lawyer's position should be confirmed in advance.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudication standards in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Criminal defense legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.