Executive Liabilities & Compliance

Not only Chinese nationals, but also foreign Managers and other executive personnel is liable and can be held responsible for their decisions and actions in China, under Chinese laws and regulations. This applies in general to all individuals who hold official management positions within a Chinese entity - such as the registered Legal Representative, the General Manager as well as all Department Heads, including all Directors and Supervisors of a Company in China.

The implementation of compliance structures can help mitigate liability risks for both: the company as well as the responsible executive personnel. Furthermore, legal evaluation of management decisions before their implementation helps to identify and mitigate liability risks under the applicable Chinese laws and regulations.

The primary focus of implementing compliance structures in a Chinese subsidiary should be the prevention of bribery and other forms of corruption, violations of customs regulations, tax evasion, as well as unfair business practices and antitrust violations.

In addition, nowadays enterprises are required to comply with a much wider range of laws and administrative regulations in China, e.g. with regard to data protection, occupational safety, or environmental standards, to name just a few examples.

The Implementation of tailor-made compliance structures in a foreign subsidiary in China is an essential tool to avoid liability risks for the enterprise as well as its management personnel.

Cases of suspected corruption, fraud, or other prohibited conduct by employees should not be ignored when reported by whistleblowers; rather, in order to prevent further harm to the Company, they should be subject to a thorough internal investigation.

It is advised that such internal investigations should better not be conducted by the Company alone, but rather with the assistance of external independent lawyers specialized in this field of work.

If allegations of compliance violations are leveled against the Company or certain executive personnel, in this case a comprehensive coordination and cooperation with the relevant Chinese Authorities is strongly advised in order to prevent further damage to the Company and - ideally - to refute the allegations raised.

In the event criminal charges are brought against executive personnel, or civil liability claims are raised against the Chinese subsidiary in accordance with Chinese laws and regulations, representation before the relevant authorities and competent Chinese Courts will be required.

In all these matters, we can provide you with our expertise, advice and support, based on our many years of on-the-ground experience in China.