Companies in China: Internal Corruption and Bribery Treatment
For those who have companies in China, it is important to know that in China corporates can be held liable for the acts of their employees, directors and officers under criminal, administrative and civil regulations.
The enforcement of anti-bribery and anti-corruption legislation in China has become increasingly vigorous in recent years. It involves the PRC Criminal Law and the PRC Anti-Unfair Competition Law (“AUCL”), along with various government departments’ administrative rules and implementations.
The PRC Criminal Law applies to:
- “official bribery”, involving government officials and state functionaries;
- “commercial bribery”, involving private enterprises and/or their employees).
AUCL prohibits “commercial bribery”.
Focusing on commercial settings, situations where corrupt practices are likely to be encountered by businesses include for instance:
-losing bidder hired by winning bidder;
-continual acceptance of high-price/low quality goods;
-unnecessary middlemen in the process;
-routine entertainment/gifts for ‘guanxi’.
In some cases, the senior management may gain benefits that are in the interest of the company itself. This may involve bribery of clients or channel partners in exchange for services or products, including tangible and intangible favors, such as the promise of more orders, better promotional channels, and so on.
There may also occur the case of company’s affiliates – such as agents/dealers/distributors - engaged in bribery.
Commercial corruption can be a serious crime in China and the consequences, of committing it, can lead to major fines for the company and imprisonment for the individuals involved as well as damage to a company’s reputation.
For this reason, it is important that companies in China have a clear understanding of the types of behavior that constitute commercial corruption in China, and have policies and procedures in place to deal with any cases that may arise.
Because of the local contexts, and the fact that individual acts of corruption by an employee can in some cases be seen as an act of corruption by the company itself, it is highly recommended for each company to take adequate measures in response, including draft of:
- codes of conduct for suppliers, clients, affiliates;
- employee policies;
- seals management procedure;
- diversified payment approval procedures etc.
The related trainings and evidence of the attendance and acknowledge by the employees is essential for company’s filing.
You can't afford to wait, if your company in China has not already taken measures internally.
Have a thought. And let's talk.
