[Direct answer]When a company is investigated or prosecuted for suspected illegal fund-raising, the unit and its directly responsible personnel shall cooperate truthfully and in accordance with the law: designate a compliance liaison person to submit contracts, financial books, bank statements, and explanations of the funds' whereabouts in a unified manner; distinguish between the unit's criminal responsibility and the natural person's responsibility to avoid destroying or forging evidence; and at the same time, hire a lawyer as soon as possible to strike a balance between cooperating with the investigation and protecting their legitimate rights and interests. The legal basis mainly includes Article 176 of the Criminal Law (Crime of Illegally Absorbing Public Deposits), Article 192 (Crime of Fund-raising Fraud), and the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Criminal Cases of Illegal Fund-raising (effective as of March 1, 2022). For more details, please refer to the following link:Legal services for corporate commercial and contract disputesAndBeijing Henglu Law Firm.

1. Problem background and typical scenarios

Illegal fund-raising cases often appear under the guise of investment and wealth management, project crowdfunding, and private placement. Once the capital chain breaks down or investors report the case en masse, the public security organ's economic investigation department may simultaneously investigate the unit and its legal representatives, actual controllers, and financial personnel. Typical scenarios include: the company failing to repay funds after attracting funds from unspecified social sources at high interest rates; salespersons being identified as accomplices for developing downlines based on performance bonuses; and actual controllers using new funds to repay old debts and misappropriating funds for personal spending. Such cases often involve overlapping civil and criminal jurisdictions. Investors want to report the case to recover their losses, while the company is concerned about being held criminally liable. The strategy of cooperating with the investigation directly affects the subsequent determination of responsibilities and recovery of losses. Relevant criminal risks can be referred to for reference.Criminal defense and criminal case filing services.

II. Key points of dispute

  • Is it a crime committed by a unit or a natural person? Whether it can be proven that the funds were decided by the unit and used for the unit's operations is the core of distinguishing the unit's responsibility from the actual controller's personal responsibility, and it is directly related to whether the legal representative and financial personnel will be held criminally liable.
  • The identification of the four characteristics of illegality, publicity, inducement, and sociality: whether the act of raising funds from unspecified individuals in the society and promising to guarantee principal and interest in an open manner determines whether the act can be classified as illegal fund-raising, which is a crucial point in defense and cooperation.
  • The amount involved in the case and the liability for compensation: How to calculate the absorbed principal, the already paid interest, and the unpaid balance directly affects the sentencing level and the determination of investors' losses. Unclear accounting records will significantly increase the liability risk.

III. Professional analysis by Henglue Lawyers

Henglue Lawyers have observed in handling cases involving compliance with and defense against illegal fund-raising that most units respond passively in the early stage due to fear, thereby missing the opportunity to clarify the boundaries of responsibilities. The value of professional lawyers lies in: first, assisting in conducting internal compliance self-inspections to determine whether the fund-raising model violates the four essential elements and identifying the division of responsibilities between units and individuals in advance; second, controlling the statements during the investigation stage to avoid the legal representatives and financial personnel being improperly implicated; third, proposing coordinated solutions for civil repayment and debt restructuring when investors report cases concurrently with criminal proceedings, reducing the additional risks caused by the confusion between criminal and civil proceedings. For cases where the funds are indeed used for business operations according to the unit's decision, emphasis should be placed on organizing evidence such as decision-making minutes and expenditure vouchers, striving to define the unit as a criminal entity and distinguishing the responsible personnel. Relevant corporate governance risks can also be referenced in this regard.Intellectual property protection and corporate legal services.

IV. Practical suggestions and legal basis

At the legal basis level: Article 176 of the Criminal Law (amended and implemented on March 1, 2021) stipulates the crime of illegally absorbing public deposits, and Article 192 stipulates the crime of fund-raising fraud; the "Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fund-raising" (Fa Shi [2022] No. 5, implemented on March 1, 2022) clarifies the identification standards and sentencing amounts for illegality, publicity, inducement, and sociality; the "Regulations on the Procedures for Handling Criminal Cases by Public Security Organs" regulate investigation, evidence collection, and cooperation obligations. Practical suggestions: 1. Immediately stop new fund-raising and abnormal transfers after the incident and appoint a compliant contact person; 2. Completely preserve contracts, account books, and transaction records, and do not tamper with or destroy them; 3. Distinguish between unit and individual responsibilities, and organize decision-making and evidence of fund use; 4. Legally communicate payout plans to investors to avoid failing to fulfill commitments; 5. Engage a lawyer as soon as possible and balance cooperation with rights protection.

5. Henglue Law Firm's Reminder

Cooperating with investigations in illegal fund-raising cases is a matter of maintaining legal boundaries: it is an obligation to truthfully confess and submit evidence according to the law, but there is no need to incriminate oneself beyond the scope of the law, nor can one destroy evidence. The unit should seize the golden window period to complete the account review and responsibility allocation, establish a solid evidence chain to prove the unit's intention and the funds belonging to the unit, and minimize the risks to natural persons. On the investor's side, they should assert their rights through legal reporting and compensation procedures. Throughout the entire process, it is recommended that professional lawyers provide full supervision, from accepting investigations, verifying the amount of losses, to coordinating criminal and civil litigation to form a closed loop, so as to avoid expanding responsibilities due to improper responses in emergencies. If your company is facing similar investigations, it is recommended to consult with materials as soon as possible and strike a balance between cooperating with the investigation and protecting yourself.

VI. Frequently Asked Questions

Q1: The company has been investigated by the Economic Crime Investigation Bureau for suspected illegal fund-raising. What should be done first?

The first thing to do is to stabilize the information, specify a single interface for communication, and preserve evidence. The company should immediately sort out the contracts involved, payment accounts, fund flows, investor lists, and redemption records. The legal representative or authorized personnel should coordinate with the investigating authorities to avoid contradictions in statements caused by multiple employees giving different accounts. At the same time, all accounting operations that could be seen as transferring assets should be stopped. According to the "Regulations on the Procedures for Handling Criminal Cases by Public Security Organs", the unit under investigation has the obligation to provide truthful evidence, but does not need to make self-incriminating statements beyond the scope of the law. It is recommended to consult professional lawyers at the same time to clarify which materials must be submitted and which need to be organized under the guidance of lawyers to prevent being identified as having knowledge or participating in the crime due to improper cooperation. When necessary, combine with the lawyer's advice to handle the case.Creditor-debtor relations and enforcement case servicesEvaluate the order of handling external debt and investors' claims.

Q2: When cooperating with the investigation, which materials must be provided and which can be refused?

For evidence obtained by the case-handling authorities in accordance with the law, such as contracts, bank statements, accounting vouchers, and investor rosters, the unit has the obligation to provide them truthfully; however, for the company's trade secrets unrelated to the case, other clients' privacy, or materials that clearly exceed the scope of the investigation, the unit may explain them according to the law and assert the scope and boundaries with the assistance of a lawyer. It is not advisable to simply refuse or hand them over indiscriminately. It should be emphasized that destroying, concealing, or forging evidence, or instructing others to give false testimony, may constitute separate crimes such as obstruction of testimony and aiding in the destruction of evidence, which are more serious in nature than mere procedural flaws in cooperation. In practice, a more prudent approach is to prepare an evidence list under the guidance of a lawyer, distinguishing three categories: those that must be submitted, those that can be applied for confidentiality, and those that need further verification. Communicate with the case-handling personnel item by item and record the process, thus fulfilling the obligation to cooperate while protecting the legitimate rights and interests of the enterprise. For cross-border fund transactions, relevant measures can also be taken in conjunction with this.Foreign-related cross-border legal servicesClarify.

Q3: How to distinguish between corporate crimes and individual responsibilities? Are legal representatives liable for the crimes committed by the company?

According to the provisions of the Criminal Law on corporate crimes, if the crime is committed in the name of the unit and the illegal proceeds belong to the unit, it is generally considered a corporate crime. The unit will be fined, and the directly responsible person in charge and other directly responsible persons will be held criminally liable. If the funds are actually decided and used by individuals, it may be considered a crime committed by natural persons, and the legal representative or actual controller needs to bear direct responsibility. Whether the legal representative is responsible depends on whether he participated in the decision-making, whether he knew the purpose of the funds, and whether he actually controlled the funds, rather than just looking at the title in the industrial and commercial registration. Therefore, when cooperating with the investigation, one should prepare evidence such as appointment resolutions, fund approval documents, and fund flow records to prove their own roles; if it is indeed a nominal position and they did not participate in the operation, they should clarify the boundaries of responsibility with the help of a lawyer to avoid being held liable indiscriminately.

Q4: Can the company still operate and transfer funds normally during the investigation period?

Being investigated does not necessarily mean a company will be shut down, but its funds and business operations must be handled with extreme caution. For accounts involved in the investigation, the investigating authorities may freeze them according to the law, and during the freezing period, the funds cannot be transferred or hidden. Otherwise, it may be suspected of violating the law; for non-involved accounts and reasonable expenses necessary for daily operations, they can continue to be used in principle, but large-scale transfers without reasonable commercial purposes should be avoided to avoid raising suspicions of asset transfer. Suggestions: Physically separate operational accounts from accounts involved in the investigation, and retain commercial substantiating documents such as contracts and invoices for daily payments; if it is necessary to dispose of assets, first confirm with the investigating personnel or lawyers whether they involve assets involved in the investigation. If the company is unable to fulfill its contract obligations due to the investigation, it should notify the counterparty in accordance with the relevant provisions of the Civil Code and fix evidence of force majeure or change of circumstances to reduce secondary breach of contract liability. For contract disputes, reference can be made to legal services for corporate commercial and contract disputes.

Q5: What's the use of hiring a lawyer to get involved in illegal fund-raising cases, and when is the best time to do so?

The role of lawyers in illegal fund-raising cases spans three stages: 1. **Investigation Cooperation Stage**: Helping clarify the scope of evidence, standardize statements, and prevent legal representatives and employees from being improperly implicated. 2. **Review, Prosecution, and Trial Stage**: Defending based on the four legal elements, corporate and individual responsibilities, and the amount involved in the case, aiming to secure a lenient characterization or differentiate responsibilities. 3. **Disposition Stage**: Coordinating investor outreach, asset liquidation, and civil liabilities to mitigate secondary risks. It's advisable to engage lawyers as early as possible—commissioning them before the first interrogation or account freezing can maximize protection of corporate and individual legal rights. If lawyers are hired only after criminal detention, the scope for action will be significantly limited. When selecting lawyers, prioritize their dual expertise in criminal defense and corporate compliance. For complex criminal-civil cross-border issues, a specialized service team should collaborate to handle them.

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

If you are 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 Henglue Law Firm