Private Offering Vs. illegal fund raising under china criminal law and supreme court interpretations

Few basic factors to know re China law

·        You are subject to China law jurisdiction as long as you are doing business in China; consequences or result are majorly happened in China, the other party is a Chinese citizen or the agreements between parties are stipulated to be subject to China law.

·        Subject to international law and multilateral treaties and federal regulations, verdicts/holdings from a China court CAN be enforced in the United States

·        Please use caution and always consult a domestic lawyer for labor/business/government compliance issues in China

What is “Illegal fundraising” in China criminal code law and binding Supreme Court interpretations? Here comes my disclaimer: this is not legal advice nor legal opinion; purely for information purposes.

There are fine lines between illegal fundraising and private placement in China law.  For all your reference, I am outlining the law below.  Please note that China is a “Code Law” legal system society and precedents do NOT have binding judicial effects to a later case.  Also China law stipulation and degree of enforcement are heavily dependent on the political and social climates.

On Jan 3, 2011, The Supreme People's Court released the Judicial Interpretations to Issues Concerning Applications of Laws for Trial of Criminal Cases on Illegal Collection of Funds.

Under the Interpretations, "where any party or individual offer, or offer in such disguised form as equity transfer the stocks or company or enterprise bonds to unspecific objects without approval of the relevant authorities, or offer, or offer in disguised form stocks or company or enterprise bonds to more than 200 individuals", such activities shall be deemed as issuing stocks or, company or enterprise bonds without due approval as stipulated by Article 179 of the Criminal Law; where the any crime is found, the relevant party or individual shall be investigated and punished as the crime of issuing stocks or, company or enterprise bonds without due approval.

The Interpretations also stipulated that where any party or individual provide advertisement services and other promotion services for the relevant parties or individuals under the precondition that the party or the individual is aware that they are engaged in issuing stocks and bonds in fraud manner, illegally raising public funds, issuing stocks or bonds without any due approval, fraud fund-raising or organizing and leading pyramid marketing, such party or individual shall be deemed as complicity of the crimes.