Simon Says: Is crowdfunding illegal in China?
This is the thirty-third in a weekly series of legal advice provided in a short and entertaining story format.
每周轻松有趣法律常識故事系列 - 第33篇
Keywords: Crowdfunding, Illegal absorption of public deposits
Is crowdfunding illegal in China?
Steven Iceberg was a fresh graduate from the Beijing Film Academy, and he majored in directing. One of his classmates, Roald Dial was a writer with super fans on his ibooks about the scary dinosaurs and Steven is also a big fan of his story.
Steven Iceberg是北京电影学院导演专业的一名应届毕业生。他的同学Roald Dial是写恐龙故事的电子书作家，粉丝众多，Steven也是他的超级粉丝之一。
Roald decided to contribute his manuscripts to Steven for 30% of the profits from the movie, and Steven signed a partnership agreement with him. All was set apart from one problem: not enough film budget. They tried lending money from classmates, but nobody was rich enough to provide RMB500,000 needed.
Steven came up with a solution: using crowdfunding to raise their film budget. They found an APP called “Cornucopia” on a website, launching a crowdfunding committing a 50-fold return in a year period. Within a week, investors have pooled together the film budget.
After a year, the movie got onto the big screen. However, people didn’t really like the film as they thought that actual dinosaurs were harmed during the production of the movie. The film didn’t even meet the budget, and investors were furious. They expected a 50-fold return, and they didn’t get a penny back in return. The case was reported to the police.
What should Steven and Roald do?
究竟Steven和 Roald 该怎么做？
Prof Simon Says:
Steven and Roald should return the pooled funds to the investors or they are very likely to be prosecuted.
The art of crowdfunding amounts to an act of absorbing funds from the public which may be in violation of the China’s Financial Regulations. If a person who commits an act satisfying all the four elements below: i) absorbing funds without the approval of the relevant authority;ii) through the media, promotion, leaflets, mobile phone messages and other channels to the public;iii) the commitment to repay the interest or pay back in a certain period of time in monetary, physical, equity and other ways;and iv) the absorption of funds is from the public, it is a criminal offence under China’s Criminal Law. It is clearly that i) Steven and Roald have not sought any approval from government authority; ii) “Cornucopia” is a social media to raise funds; iii) a 50-fold return for the amount invested and repayment within a year; iv) targeted for non-specific groups. Their crowdfunding falls into all four prongs and they have to act fast to avoid being put behind the bars.
众筹是一种吸收公众资金的行为，这可能有悖于金融法。当一个人满足以下四种情况：1）在没有有关当局的批准的情况下吸收资金; 2）通过媒体、宣传活动、传单、手机简讯等渠道向公众传播; 3）承诺在一定时间内以货币、实物、股权等方式偿还利息或偿还资金; 4）根据《中国刑法》相关规定，吸收公众资金属于刑事犯罪。显然，1）Steven 和Roald此做法未经政府批准; 2）“聚宝盆”是募集资金的社交媒体; 3）一年内投资还款金额50倍的回报率 4）针对非特定群体。Steven和Roald的众筹项目符合以上四种情况，因此他们必须尽快采取应对，以免受牢狱之灾。
On December 13, 2010, Interpretation of the Supreme People's Court on several issues concerning the specific application of law relating to criminal cases of illegal fundraising.
The act of absorbing funds from the public (including units and individuals) in violation of the provisions of the laws of the state financial management, with the following four conditions, shall, except as otherwise provided in the criminal law, be deemed to be the "unlawful absorption of public deposits or the disguised absorption of public deposits" as stipulated in Article 176 of Criminal Law
(i) Absorbing funds without the approval of the relevant departments or by borrowing legal business;
(ii) Through the media, promotion, leaflets, mobile phone messages and other channels to the public publicity;
(iii) The commitment to repay the interest or pay back in a certain period of time in monetary, physical, equity and other ways;
(iv) The absorption of funds to the social public, i.e., to the world at large.
If it is not publicized, it is not illegal to absorb or absorb the public deposit in the form of a person or family or a unit.
For more about this or to contact Professor Simon Choi at www.acmeardent.com, firstname.lastname@example.org, +86 13823677853 or by WeChat: simonhkchoi.
About the Author: Professor Simon Choi
Prof Simon Choi, solicitor and linguist, is an international lawyer, qualified to practise law in England & Wales and in Hong Kong, China. Simon graduated from law schools of the Peking University, the University of London and the University of Hong Kong respectively, with an in-depth knowledge of Chinese laws and common laws and with more than 20 years experience in China practice and international trade, investment, finance, merger & acquisition. He is an adjunct professor of laws at the Zhongnan University of Economics and Law. Simon is the founding partner of Acme Ardent and can be reached at email@example.com or +86 13823677853.