[Direct answer]In the Beijing area, when enterprises conduct criminal risk audits, the purpose is to ensure compliance and prevention. If the audit is conducted properly and does not infringe on trade secrets, it will not violate the law. However, if the audit process involves accessing, copying, or disclosing others' confidential information without proper protection, it may constitute a violation of the Trade Secrets Act of the People's Republic of China or a breach of confidentiality obligations. The key points are whether the audit scope is limited to the enterprise's own data, whether a confidentiality agreement has been signed, and whether a firewall has been set up to protect third-party information. It is recommended to entrust a professional lawyer team with compliance qualifications to conduct the audit within a confidentiality framework. For more details, please refer to the following link:Intellectual property protection and corporate legal services.

I. Problem Background and Typical Scenarios

Criminal risk audits have become a hot topic in corporate compliance in recent years. They involve lawyers conducting inspections of potential criminal risks in areas such as the company's business model, financial transactions, employment practices, taxation, and intellectual property. Typical scenarios include: prospective financing companies voluntarily conducting audits to reassure investors; groups conducting compliance audits of their subsidiaries; and companies involved in legal disputes conducting self-diagnoses before seeking leniency for compliance violations. Common questions often arise: Should the audit involve reviewing the partner's materials? Could this expose confidential data from other companies? Do employees' personal client lists count as trade secrets? If these issues are not handled properly, defensive audits could instead become sources of infringement. For audits involving intellectual property, it may be appropriate to combine them with other relevant procedures.Intellectual property protection and corporate legal servicesClarify the boundaries.

II. Key points of contention

There are three key points of contention. First, the scope of information: whether the physical examination should be limited to the current company or extended to related third parties. Excessively broad retrieval scope may easily lead to legal risks. Second, the obligation of confidentiality: lawyers and accountants participating in the physical examination have the obligation to keep others' trade secrets confidential. Any unauthorized disclosure or use of such information for business purposes may constitute infringement or even a crime. Third, the qualification of employees' access to information: whether customer lists and technical parameters constitute trade secrets depends on whether they are "not known to the public, have commercial value, and are subject to confidentiality measures taken by the rights holder". For issues related to contract and data compliance, reference can be made to relevant regulations.Business and contract dispute resolution services for enterprisesEstablish an isolation mechanism, or combine it with other measures.Special services and other case-related servicesCarry out a special due diligence investigation.

III. Professional analysis by Henglue Lawyers

Based on observations of corporate compliance practices, the biggest pitfall of health checks is "uncontrolled scope". According to Article 219 of the Criminal Law, the crime of infringing trade secrets requires that the perpetrator obtain the trade secrets of the right holder by improper means such as theft, bribery, fraud, and electronic intrusion, or disclose and use the trade secrets of the right holder in violation of the obligation of confidentiality, and the circumstances are serious. When conducting criminal risk health checks, Henglu Law Firm usually adopts the "three isolation" approach: only reviewing the materials held by the entrusted enterprise, obtaining written authorization for information that requires third-party involvement, and using all confidential materials under the protection of confidentiality agreements and physical isolation, and destroying them within a limited period. For technology and biomedical enterprises, special attention is also paid to preventing the cross-border transfer of R&D data and clinical information. For issues involving criminal compliance, follow-up services can be provided accordingly.Criminal defense and criminal case filing servicesSynchronized deployment of defenses.

IV. Practical Suggestions and Legal Basis

The legal basis is Article 219 of the Criminal Law (amended on December 26, 2020) (the crime of infringing trade secrets, with a maximum sentence of three years' imprisonment if the circumstances are serious, and a maximum sentence of more than three years but less than ten years' imprisonment if the circumstances are particularly serious, all accompanied by fines); as well as the provisions of the Anti-Unfair Competition Law on the constitutive elements of trade secrets and the burden of proof; and the supporting provisions of the Civil Code on confidentiality obligations and breach of contract liability. Practical suggestions: Before the physical examination, sign a confidentiality agreement and a service scope confirmation letter with the law firm, specifying that the information is limited to the company's materials; if third-party information is needed, it must be authorized and anonymized; establish a record of access to materials and destruction records; and have the participating personnel sign confidentiality commitments. For confidentiality and non-compete arrangements in employment, they can be combined with other relevant provisions.Labor arbitration and work-related injury compensation servicesImprove the system.

5. Henglu Law Firm's Reminder

The criminal risk check is a defensive tool. If used properly, it can protect the company; if not, it may lead to trouble. Three reminders: First, hire a law firm with compliance qualifications and sign a written confidentiality agreement, clarifying that the scope of the check is limited to the company itself; Second, maintain a distance from the information of partners and competitors. Any retrieval of such information must be authorized and anonymized to prevent "casual copying"; Third, whether the client lists taken away by departing employees constitute infringement depends on whether they are trade secrets and whether there are breaches of contract. Never make a general determination. Enterprises should not only use the check to eliminate potential risks, but also prevent the check itself from becoming a source of infringement. If professional support is needed, they can seek assistance from relevant institutions or professionals.Special services and other case-related servicesDesign a closed-loop for compliance.

VI. Frequently Asked Questions

Q1: If I undergo a criminal risk check, could I end up infringing on trade secrets instead?

A proper and well-defined physical examination will not lead to legal issues, but an uncontrolled physical examination might. Only when unethical means are used to obtain information during the physical examination, or when personal commercial secrets are disclosed or used in violation of confidentiality obligations, and the circumstances are serious, might it violate Article 219 of the Criminal Law. As long as the physical examination only accesses the company's own data, obtains authorization and de-identifies third-party information, signs a confidentiality agreement, and uses the information separately, it is a legitimate defensive measure. Therefore, the risk does not lie in the "physical examination" itself, but in whether the operation exceeds the boundaries. It is recommended to entrust a professional compliance team and sign a confidentiality scope confirmation letter to isolate the possibility of infringement at the source.

Q2: When conducting a criminal risk check, what materials do enterprises need to provide and pay attention to?

The company mainly provides the following documents: business licenses and equity structures, business contracts and transaction records, employment and compensation systems, intellectual property registrations and R&D records, tax and social insurance payment records, as well as past compliance or punishment records. The key points are as follows: only provide the company's own materials and do not disclose the confidential information of cooperation partners without authorization; desensitize or obtain authorization for documents containing third-party confidential information; establish a document access log. At the same time, sign a confidentiality agreement with the law firm to clarify the purpose of the materials and the methods of storage and destruction. Only when the materials are true and complete can the physical examination conclusions be reliable, and it can also avoid inadvertently bringing others' trade secrets into the scope of the physical examination.

Q3: What is the general fee for a criminal risk physical examination?

The fees are usually charged based on the complexity of the project, the size of the enterprise, and the number of business segments. They are either charged on a per-item basis or based on the target/workload ratio, which is negotiated and written into the contract by the law firm and the client. There is no unified standard. The cost of a group audit involving multiple segments and subsidiaries is higher, and if the audit reveals the need for special rectification or litigation, it is usually charged separately. According to relevant regulations, legal service fees should be transparent and agreed upon in writing. It is recommended that enterprises require the law firm to provide a service list and a quotation breakdown before entrusting the service, clarifying which items are included in the basic fee and which are charged separately, to avoid the cost getting out of control during the process.

Q4: How long does a criminal risk physical examination typically take?

The duration of the review depends on the size of the enterprise and the complexity of the sector: for small and medium-sized enterprises, a single sector review may take several weeks to complete; for groups with multiple sectors and cross-regional operations, it often takes one to three months, and longer if it includes rectification suggestions and system reconstruction. If obvious criminal risks are identified during the review, they must be dealt with immediately. Lawyers will first provide advice and initiate special measures. Enterprises should view the review as an ongoing project rather than a one-time action, and it is recommended to conduct a follow-up review annually or before major transactions. For cases involving multiple jurisdictions or cross-border data, the evaluation period may be extended in conjunction with relevant professional services to ensure that no blind spots are left during the investigation.

Q5: If a company wants to conduct a criminal risk assessment, how exactly should they proceed with the process?

Four steps: First, clarify the objectives and scope of the physical examination (which businesses, whether it includes subsidiaries, and whether it involves third parties), and formulate written requirements; Second, select law firms with enterprise-compliant pricing, interview and evaluate their criminal compliance and industry experience, and sign confidentiality agreements and service confirmation letters; Third, only provide the company's own information. Third-party information must be authorized for anonymization, and a record of access and destruction must be established; Fourth, after receiving the risk list, rectify each item one by one, prioritize addressing major hidden risks, and establish long-term mechanisms. Throughout the process, we must adhere to the bottom line of "not obtaining information beyond the scope of authorization and not disclosing information in violation of regulations", so that the physical examination can truly play a role in identifying and eliminating risks rather than creating new ones.

The above content is based on the compilation of judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglu Law Firm for specific cases.

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

Disclaimer: This article is compiled based on the current effective laws and regulations and open 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. If you encounter disputes, please consult a practicing lawyer in time.