On 23 October 2023, the Supreme People’s Procuratorate (SPP) released 10 typical cases that showcase the effective performance of procuratorial duties in promoting the growth of the private economy. Among the chosen cases was the one involving illegal absorption of public deposits by Company J and Zhang in Shenzhen City, Guangdong Province, which was handled by King & Wood Mallesons (KWM).
This case serves as a notable example of a technology innovation company accused of illegal fundraising activities obtaining a non-prosecution decision through the compliance procedure of the involved company. The KWM team, acting as the defender and compliance consultant of the involved company, demonstrated an in-depth understanding of the case. They accurately determined the scope of compliance and rectification and formulated a special compliance plan. Focusing on the company’s fund sales and private securities business, the KWM team assisted the company in establishing a comprehensive compliance mechanism for fund sales and carried out a risk check of the private equity fund business. The team assisted the company in successfully passing the on-site surprise inspections, random “examinations”, simulated tests of non-compliance and other acceptance work conducted by the procuratorial authorities and third-party organisations. The procuratorial authorities and third-party organisations highly recognised the company’s rectification efforts. Based on the factual circumstances, corporate compliance and rectification, and the application of the of leniency policy for confession and accepting punishment, they decided not to prosecute Company J and Zhang in accordance with the law. At present, Company J has achieved benign and orderly development, with an enhanced legal compliance and risk mitigation awareness. This rectification has led to improved operational capabilities, with business revenue in the fourth quarter of last year showing a notable 13% increase compared to the previous quarter.
This case required a high level of expertise. KWM organised a cross-office team of lawyers from Beijing and Shenzhen with diverse professional backgrounds in criminal law, compliance and fund to work closely together within a tight timeframe. The result of this coordinated approach has provided valuable insights into how companies in the financial sector can navigate criminal risks through their respective compliance procedures.
The team was led by partners Wu Wei, Yang Fan and Song Ke, with support from Liu Yanjie, Yin Junrui, Zhao Yan, Zhao Huiyan, and Yin Letian.
