What are administrative penalties against Chinese companies?
In the last few decades China’s administrative law has changed dramatically as part of the country’s massive economic reforms that have catapulted China on to the world stage as an economic and business juggernaut.
Understanding the basics of Chinese administrative and business law can help you make informed decisions as you navigate the seemingly complex landscape of business procedures and operations when dealing with a Chinese company.
Given the immense network of business entities and interests currently operating in China, monitoring the business affairs that cross virtually very industry and sector both domestically and globally is very complex. Then comes the gargantuan task of addressing wrongdoings ranging from minor infractions to major breeches of business law. The legal system in China has been grappling with developing regulations and laws over the last several decades that both protect its national business interests while simultaneously ensuring those businesses continue to play a major role in the global economy.
China began an overhaul of its administrative law systems in conjunction with the massive economic reforms the country enacted in the early to mid 1980s. Many of these reforms served as the precursors to the landmark Administrative Penalty Law of the People’s Republic of China, adopted on March 13, 1996 at the fourth session of the Eighth National People’s Congress. The law went into effect on October 1, 1996.
The administrative law essentially allows for administrative penalties to be issued against a company for breaches of corporate compliance. Chinese citizens can challenge administrative actions undertaken by a state agency, personnel, or company. Once under review, the applicable local people’s court review and rule on the challenged state action.
Penalties against the company can start out as benign as warnings and fines and then escalate to more severe consequences such as revocation of certificates or business licenses. In more extreme cases, companies can face confiscation of illegally gained income or property, suspension of production or operations, provisionally suspending or revoking permits or licenses, and administrative detention such as criminal punishment or even prison.
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