[Direct answer]In the Beijing area, when corporate executives are suspected of committing crimes, the impact on the company mainly includes four aspects: Firstly, if the executives' illegal activities reflect the company's intention and seek benefits for the company, the company may constitute a corporate crime and be fined according to Articles 30 and 31 of the Criminal Law, and the directly responsible person in charge will also bear criminal responsibility; Secondly, after the executives are subject to compulsory measures such as detention and arrest, the company's operation and management and contract performance may be stalled and face breach of contract compensation; Thirdly, the investigating authorities may inquire into and freeze the accounts and property involved in the case according to Article 144 of the Criminal Procedure Law, which will affect the capital chain; Fourthly, the company's business reputation, financing ability, and stock price may be affected. It is recommended that the company conduct internal verification, cooperate with the investigation, and evaluate the space for regulatory rectification of the involved company after the incident. For more details, please refer to the following link:Legal services for corporate commercial and contract disputes.

I. Problem background and typical scenarios

In practice, it's not uncommon for corporate executives (legal representatives, chairmen, general managers, financial directors, etc.) to be investigated for suspected crimes, with common charges including embezzlement, misappropriation of funds, bribery, falsifying VAT invoices, illegal absorption of public deposits, and refusal to pay labor compensation. Once a case occurs, the company is often passively involved: the legal representative is detained, leaving the company's official seal, business license, and bank accounts unattended; the absence of core business leaders leads to disruptions in order delivery and financing negotiations; and account freezes prevent the payment of salaries and supplier payments, triggering a chain reaction of labor arbitration and contract breaches. For companies planning to go public, raise funds, or participate in bidding and tendering, criminal risks may also trigger failed exit clauses and suspension of qualifications, with far-reaching consequences beyond the individual case itself.

II. Key points of contention

  • Determination of corporate crime: Whether the act has been decided by the company, the ownership of the benefits, and whether the executives have exceeded their authority are the core factors in distinguishing corporate crime from individual crime, and they directly determine whether the company will be fined.
  • The scope of the assets involved in the case: Whether the property sealed, seized, or frozen by the investigating authorities truly belongs to the assets involved in the case is often a matter of controversy. If it is confused with the company's normal operating assets, it may affect the capital chain and normal operations.
  • Forced measures and business continuity: After the legal representative or actual controller is detained, how to legally authorize others to exercise their powers and ensure the normal operation of the company is a frequent and difficult issue in practice.

III. Professional analysis by Henglue Law Firm

Based on the practical observations of handling similar cases, when enterprises face executives involved in criminal cases, they usually experience three major impacts: at the criminal level, it involves the determination of corporate crime and the disposition of involved assets; at the civil level, contract counterparties may claim breach of contract, and shareholders may claim damages; at the administrative and commercial level, it may involve qualifications, credit, and obstacles to the listing process. In practice, courts and investigative authorities tend to be more cautious in determining corporate crime, emphasizing the substantive review of whether the executives acted in the interests of the company and reflected the company's will. Executives who are merely nominal and did not participate in decision-making may not be identified as directly responsible persons. For enterprises involved in the case, since the Supreme People's Procuratorate implemented the compliance reform for enterprises involved in cases in 2021, qualified enterprises can strive for non-prosecution or lenient treatment through compliance rectification. The targeting and effectiveness of the compliance plan are the key concerns of the case-handling authorities, and the relevant procedures can be combined with the case-handling process to reduce the impact on the enterprise's normal operations.Special services and other case servicesCollaborate to make progress together.

IV. Practical Suggestions and Legal Basis

At the legal basis level: Articles 30 and 31 of the Criminal Law (amended and implemented on March 1, 2021) establish the concept of corporate crime and the double punishment system; Article 144 of the Criminal Procedure Law (amended and implemented on October 26, 2018) stipulates that investigative organs may inquire into and freeze the property involved in the case; Article 145 stipulates that the freezing of deposits and other assets shall not exceed the scope of the investigation, and those found to be unrelated to the case shall be unfrozen within three days; Article 180 of the Company Law (implemented on July 1, 2024) stipulates that directors, supervisors, and senior managers have a duty of loyalty and diligence to the company, and Article 188 stipulates that if a director or other executive causes damage to others in the performance of their duties, the company shall bear the responsibility and may then seek compensation from the person at fault. Practical suggestions: - Immediately establish an emergency team after the incident to safeguard contracts, financial records, and approval records; - Timely disclose information to the public and arrange for agency rights to ensure business operations and wage payments; - Clarify the boundaries of the property involved in the case and submit proof of legitimate assets to the investigative authorities; - Evaluate compliance rectification and criminal defense strategies, and, if necessary, cooperate with legal professionals to handle the case.Creditor-debtor relations and enforcement case servicesCollaborate to handle chain debts.

5. Henglue Law Firm's Reminder

The impact of executives' involvement in criminal cases on companies is often a chain reaction involving criminal, civil, and commercial aspects, which is difficult to eliminate solely through remedial measures after the fact. It is recommended that enterprises prioritize compliance: improve the traceability of internal decision-making and approval processes, separate the authority of key positions, and establish a mechanism for separating assets involved in criminal cases from operational assets; simultaneously launch criminal defense and corporate governance remediation at the early stages of the incident, both to protect the company from being unfairly implicated and to maintain normal business operations. For enterprises that meet the conditions for compliance reform, they should seize the opportunity for rectification to strive for lenient treatment. For more risk prevention and control of criminal and commercial cross-border risks in enterprises, please visitBeijing Henglue Law FirmUnderstand the team's experience and develop a response plan based on the specific case.

VI. Frequently Asked Questions

Q1: If an executive commits a personal crime, is the company also liable for it?

Not necessarily. The key question is whether it constitutes a corporate crime. According to Article 30 of the Criminal Law, if a company, enterprise, institution, government agency, or organization commits acts that harm society and are defined by law as corporate crimes, it shall bear criminal responsibility. Article 31 stipulates that if a unit commits a crime, the unit shall be fined and its directly responsible principal persons and other directly responsible persons shall be sentenced to criminal punishment. The main criteria for determining whether a crime is a corporate crime include: whether the act reflects the will of the unit (such as being decided by the collective decision-making process and carried out in the name of the unit); whether it seeks benefits for the unit; and whether the benefits belong to the unit. If the executives commit crimes purely for personal gain and without the authorization of the unit, it is generally considered an individual crime, and the company does not bear direct criminal responsibility, but may still bear civil and administrative responsibilities due to negligence in management.

Q2: If the executive's account is frozen, can the company's money still be withdrawn?

It depends on the nature of the account and the ownership of the funds. According to Article 144 of the Criminal Procedure Law, investigative organs can only inquire into and freeze the deposits, remittances, bonds, stocks, fund shares, and other property of suspects related to the case, and may not freeze funds beyond the scope of the case. If the funds frozen in the company's account truly belong to the company's legitimate operations and are unrelated to the crime, the company may provide evidence such as the business license, accounting vouchers, and contracts to the investigative organ to explain the situation and apply for the lifting of the freeze or separate handling; for funds stored together and difficult to distinguish, the processing period will be extended. It is recommended that the company sort out the flow of funds immediately after the account is frozen, entrust a lawyer to communicate with the investigative organ and submit proof of ownership and legality to avoid innocent funds being occupied for a long time.

Q3: Can the company claim that the executives' crimes are personal acts and have nothing to do with the company?

This can be claimed, but it requires evidence to support it. The company should defend itself by arguing that the actions in question did not reflect the company's will, did not benefit the company, and the benefits went to individuals: provide internal decision-making systems and approval records to prove that the actions in question did not follow normal approval procedures or clearly exceeded authorizations; provide financial vouchers to prove that the funds did not enter the company's account or were not used by the company; provide job responsibility documents to prove that the executive's actions deviated from his duties. If the company can prove that it has established compliance systems, was unaware of the criminal acts, and took timely remedial measures, it can usually avoid being identified as a corporate criminal; conversely, if the company has long tolerated and profited from illegal activities, it will be difficult to dissociate itself from the crimes. It is recommended to seek legal advice at the same time.Legal services for corporate commercial and contract disputesEvaluate the contract and governance risks.

Q4: If a company's executives are arrested and the company fails to deliver the goods as contracted, what should they do?

Firstly, the company should still bear contractual responsibilities towards external parties and cannot simply use the arrest of its responsible person to counter the contractual counterpart. However, it can take mitigation and remedial measures in accordance with the law: immediately appoint an authorized representative to take over the business, perform duties in accordance with the company's articles of association and Article 180 of the Company Law, and resume performance or negotiate a change in the delivery deadline as soon as possible; for those who are temporarily unable to perform due to compulsory measures, notify the other party in writing and keep evidence in time, claiming force majeure or changes in circumstances require strict identification, which is usually difficult. A more practical approach is to negotiate termination or entrust a third party with the task; if the company's external compensation is directly caused by the personal criminal acts of senior executives, the company can recover the compensation from the at-fault senior executives in accordance with Article 188 of the Company Law after making the payment. It is recommended to engage a lawyer as soon as possible to avoid the expansion of default losses and to fix the evidence for recovery of compensation.

Q5: Can the company hold the criminal executives accountable and seek compensation from them afterwards?

Yes. According to Article 188 of the Company Law (effective July 1, 2024), if a director, supervisor, or senior manager causes damage to others in the performance of their duties, the company shall bear civil liability. After the company assumes civil liability, it may seek recourse from the directors, supervisors, or senior managers at fault; if the executive's actions also constitute a criminal offense, the company may also initiate a criminal incidental civil action or claim civil compensation separately from the criminal case restitution, requiring them to compensate for the direct losses caused to the company by embezzlement, misappropriation, or official misconduct. In practice, it is necessary to first fix the evidence of the causal relationship between the executive's duties and the company's losses (accounting records, contracts, judgments), and then seek to assert rights through internal accountability, civil litigation, or enforcement procedures at an appropriate time. It is recommended to entrust a lawyer to evaluate the statute of limitations and the path of evidence collection.

The above answer is based on the judicial practice in the Beijing area. The adjudication standards in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, to avoid missing the statutory time limit. →Business and commercial legal services·Beijing Henglu Law Firm