[Direct answer]In the Beijing area, whether offering "kickbacks" to the counterparties or key decision-makers constitutes commercial bribery depends on the payment method and the way the funds are recorded. According to Article 7 of the Anti-Unfair Competition Law of the People's Republic of China, if an operator uses money or other means to bribe employees of a unit in order to obtain business opportunities or competitive advantages, it constitutes commercial bribery; however, discounts and commissions that are truthfully recorded are not included. In serious cases, it may also violate the provisions of the Criminal Law of the People's Republic of China on bribing and accepting bribes from non-state employees. It is recommended to clarify the accounts and intentions first. For more details, please refer to the following link:Business and contract dispute services for enterprises.

I. Problem Background and Typical Scenarios

In procurement, sales, and project cooperation, it's not uncommon to offer benefits to the counterpart's agents under the guise of "rebates", "tea money", or "consulting fees". Typical scenarios include: suppliers secretly giving kickbacks to procurement managers to secure orders; agents paying bribes to key channel personnel to obtain exclusive qualifications; and using fake consulting contracts to conceal the transfer of benefits. Once such actions are verified, not only will the contracts be invalidated and the funds difficult to recover, but the company may also face administrative penalties or even criminal prosecution. For cases involving criminal liability, reference can be made to the relevant provisions of the Criminal Law of the People's Republic of China.Criminal defense and criminal case filing servicesFor cross-border transactions, it can be combined withFinancial capital and cross-border services involving foreign countries.

II. Key points of contention

There are three main points of contention regarding the determination of the nature of kickbacks. Firstly, whether it is "secretly off the books": discounts or commissions that are accurately recorded in the accounts and explicitly disclosed to the other party are generally not considered bribes; but if they are paid privately and not recorded in the accounts, the risk increases significantly. Secondly, the identity of the recipient: bribing employees of the other party or personnel entrusted with managing public affairs will result in different legal qualifications. Thirdly, the amount and circumstances: large amounts and serious circumstances may constitute criminal offenses. Another point of contention is whether the packaging of bribes can exempt one from liability - if the bribes are disguised as consulting fees or service fees, they may still be identified as bribes. In cases involving creditor disputes, reference can be made to relevant legal provisions.Creditor-debtor relations and enforcement case services.

III. Professional analysis by Henglue Law Firm

Based on our practical experience in handling corporate commercial cases, the biggest risk of kickbacks is the "mismatch between name and reality". Many companies mistakenly believe that signing a consulting contract and issuing an invoice are enough to ensure safety, but the flow of funds and the authenticity of services can be easily verified upon investigation. Henglu Lawyers usually recommend the following: first, distinguish between legal discounts and illegal kickbacks. Discounts must be clearly stated and accurately recorded in the accounts; second, check whether there are any off-book benefit transfers in existing cooperations and rectify them in time; for those that have been investigated or reported, sort out the accounts and fix the communication records as soon as possible, and evaluate the boundaries between administrative and criminal penalties. Compliant incentive policies should adhere to the principles of openness, recording in the accounts, and linking with performance, to avoid crossing the line. For special compliance issues, assistance from specialized compliance experts can be sought.Special services and other case services.

IV. Practical suggestions and legal basis

The core basis is Article 7 of the Anti-Unfair Competition Law of the People's Republic of China (amended on April 23, 2019), which explicitly prohibits operators from bribing employees of the counterparties to obtain trading opportunities or competitive advantages; the provisions of the Company Law of the People's Republic of China (amended on December 29, 2023 and implemented on July 1, 2024) prohibiting controlling shareholders and actual controllers from using their affiliated relationships to harm the company's interests; and Articles 163 and 164 of the Criminal Law of the People's Republic of China (implemented on October 1, 1997) concerning the crimes of bribery and offering bribes by non-state employees. Practical suggestions include: disclosing and recording discounts and commissions publicly, signing written agreements; establishing anti-bribery compliance systems and employee training programs; and conducting timely legal checkups on suspicious cooperations. For contract design-related matters, reference can be made to the relevant provisions.Business and contract dispute services for enterprises.

5. Henglu Law Firm's Reminder

Companies should never regard kickbacks as a shortcut to gaining customers. Even if they secure orders in the short term, once the truth comes out, they may face penalties such as invalid contracts, loss of payments and breach of contract penalties, or even criminal charges for responsible persons and being listed as untrustworthy enterprises. It is recommended to establish transparent sales incentive and discount approval processes, and accurately record and retain evidence for all rebates and consulting fees; promptly stop and document any "benefits" privately promised to employees. If the company has received reports or regulatory inquiries, it should consult a lawyer as soon as possible to clarify the boundaries during the administrative investigation stage to avoid the situation escalating into a criminal case.

VI. Frequently Asked Questions

Q1: If I offer a kickback to the other party, will I definitely be considered guilty of commercial bribery or a crime?

Not necessarily. Whether it constitutes commercial bribery depends on whether it is done "secretly and off the books" and whether the purpose is to seek improper business opportunities. According to Article 7 of the Anti-Unfair Competition Law, discounts and commissions that are explicitly stated and properly recorded in the accounts do not constitute commercial bribery; only those paid privately, not recorded in the accounts, and intended to bribe decision-makers constitute illegal acts. Whether it constitutes a crime also depends on the identity of the recipient, the amount involved, and the circumstances of the case. Only when it meets the standards for filing a case may it be subject to criminal prosecution. Therefore, it cannot be generalized and should be judged based on the accounts and specific actions.

Q2: If a company is reported or investigated for kickback issues, what evidence should it prepare?

The core materials include: relevant contracts, orders, and approval processes; bank transaction records and deposit certificates, to prove whether the funds were accurately recorded; invoices, receipts, and consultation service outcome documents; internal anti-bribery systems and employee training records; as well as communication records, emails, and chat content of the involved personnel. The evidence should be organized around "whether the payments were explicitly recorded, whether they were genuine transactions, and whether there was any transfer of benefits". The more comprehensive the evidence of clear accounts and transparent discounts, the lower the risk of being found guilty of violations. It is recommended to fix electronic evidence as soon as possible to avoid its loss.

Q3: How much does it cost for a company to hire a lawyer to deal with the issue of rebates?

The fees depend on the stage and complexity of the matter. If it's just compliance consulting and system establishment, the fees are usually charged on a per-case or annual basis, with relatively limited amounts; if it involves administrative investigations or criminal cases, it requires intervention in response, review of case files, and defense, with the workload and fees increasing significantly. The specific fees will be determined by the contract and there is no unified standard. Compared with administrative fines, losses due to contract invalidation, or criminal fines, the investment in early-stage compliance and response is usually more manageable. It is recommended to clarify the scope of services and fee calculation methods with the law firm before entrusting the case, and to choose a solution based on the risk stage.

Q4: How long does it usually take to handle investigations or criminal cases related to kickbacks?

The duration of an administrative investigation varies depending on the complexity of the case and the difficulty of gathering evidence, typically taking several months. If the case proceeds to criminal litigation, the entire process of investigation, review of prosecution, and trial often takes years. For ordinary criminal cases, the first-instance trial lasts several months, and more complex cases take even longer. In contract disputes, if the claim for kickbacks is invalid or the funds are returned, the first-instance civil litigation typically takes three months in summary proceedings and six months in ordinary proceedings. Overall, the criminal litigation process is much longer than the civil litigation process. It is recommended to intervene in the early stages of the investigation to clarify the situation and avoid transferring the case to criminal litigation, thereby shortening the overall processing time.

Q5: If a company discovers hidden kickbacks in a collaboration, what should be the first step to take?

It is recommended to follow four steps: Firstly, immediately stop off-book payments, freeze the flow of suspicious funds, and retain the relevant evidence; Secondly, sort out the relevant contracts, transaction records, and communication records to determine whether there are undocumented bribes; Thirdly, distinguish between legal discounts and illegal kickbacks, and for the former, correct the bookkeeping procedures, and for the latter, rectify and refund in a timely manner; Fourthly, if the case has been reported or investigated, consult a lawyer as soon as possible to assess the boundaries between administrative and criminal responsibilities and formulate response plans. It is strictly prohibited to destroy accounting records or give false testimony, so as to avoid aggravating responsibilities.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the interpretation of the law 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. →Business and commercial 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.