Many businesses, upon discovering employee embezzlement or partner fraud, stop after filing a report. The common outcome: the case is prosecuted, the offender is punished, but the lost funds or assets remain unrecovered because the business missed critical proactive steps as a victim.
After filing a report, how long until the case is handled? Is the business automatically compensated when the offender is convicted, or must it file a request? If the offender dissipates all assets before prosecution, does a judgment for compensation hold any meaning? These are questions many businesses, including those with foreign investment, only ask when it is too late. This article analyzes the legal framework, procedural steps, and common pitfalls to help businesses protect their rights from the reporting stage through to the enforcement of compensation.
The Business as a Victim: Establishing Procedural Standing
Not every damaged business participates in a criminal case with the same standing, and this standing determines the scope of rights the business may exercise.
This means that a business suffering from embezzlement, fraud, or abuse of trust can be identified as a victim from the investigation stage, without waiting for the prosecution of an accused person. As a victim, the business (via its legal representative or authorized person) has the right to provide evidence, prove damages, propose compensation amounts and security measures, receive investigation results, participate in court sessions, and debate to protect its interests. If the business is not directly harmed by the criminal act but files a claim for damages arising from the case (e.g., a third party involved), it participates as a civil plaintiff, with similar rights regarding requests and appeals on the compensation portion.
Determining the correct standing early is vital as it affects whether the business can proactively propose compensation amounts and request damage assessments, rather than standing by waiting for investigation results.
From Reporting to Prosecution: Deadlines and Preparation
Reporting a crime is not a mere formality but the starting point that determines the future pace of the case.
Businesses may submit a formal denunciation (where the representative reports directly) or a written report to the competent Investigation Agency or Procuracy. The more complete the initial evidence (contracts, accounting books, bank statements, debt reconciliation minutes, internal documents proving appropriation), the better the basis for the investigation agency to verify quickly and issue a decision to prosecute.
Within this timeframe, businesses should proactively cooperate and provide additional documents when requested, rather than waiting passively, as this is also the stage where the investigation agency can apply verification measures such as collecting documents, requesting expert assessments, and valuing assets as a basis for prosecution and later calculating compensation.
Compensation Claims: Combined in Criminal Case or Separated?
This is where businesses are most confused: many believe compensation is an automatic consequence of a criminal judgment, while in reality, the business must proactively make the request and provide proof.
In principle, a business's compensation request is settled within the criminal case, alongside the charges and penalties, to avoid the need for a separate civil lawsuit. The grounds for liability and the method of determining property damage are specified in the Civil Code:
For businesses, damages often extend beyond the money or asset value appropriated, potentially including reasonable costs incurred to verify and prevent the spread of damage (e.g., independent audit fees, expert appraisal fees) and lost benefits from not being able to use the asset during the period of appropriation. The guiding resolution of the Judicial Council of the Supreme People's Court reaffirms this principle of simultaneous settlement and requires claimants to specify each item of damage with supporting documentation:
In other words, businesses should not wait until the court hearing to present damages, but should prepare and submit a damage proof dossier (with a specific request for the compensation amount) as early as possible during the investigation process, so the case file has sufficient grounds for simultaneous settlement.
Asset Recovery: Role of Physical Evidence and Judgments
Even if the court mandates the defendant to compensate, the actual enforcement depends heavily on whether assets were handled and frozen in time during the investigation.
This is why businesses should proactively request that the investigation agency early apply measures to seize and attach assets related to the criminal act, rather than waiting until there is a judgment to consider enforcement. Regarding sanctions, besides the primary penalty, the court also applies judicial measures to compel the return of assets and compensation:
This measure applies independently of the prison sentence or fine the defendant faces, meaning that even if the defendant is imprisoned, the obligation to return assets and compensate the business continues in parallel and is included in the judgment as a basis for future civil enforcement.
Common Mistakes Leading to Loss of Rights or Assets
A common misconception is that all criminal cases are only prosecuted when the victim requests it, as with some crimes against health. In reality, the provision for prosecution upon victim request only applies to a specific group of crimes (mainly minor crimes against health, honor, and dignity), not to crimes against property such as embezzlement, fraud, or abuse of trust where businesses are typically victims. In other words, for these crimes, the investigation agency prosecutes under its general authority as soon as there are sufficient grounds; businesses do not need to and cannot stop the case by "withdrawing the complaint" as some believe.
Another mistake is that businesses fail to distinguish clearly between the role of a victim (when directly harmed by the criminal act) and a civil plaintiff (when requesting compensation arising from the case but not being the direct object of the infringement), leading to the submission of dossiers or requests without proper authority or being rejected for lack of procedural standing. Additionally, many businesses wait until the court hearing to provide evidence of damages, while according to the Judicial Council's guidance, the claimant must specify each item of actual damage with supporting documentation as soon as the request is made; late provision results in the court not having sufficient grounds to declare the full compensation amount desired by the business.
DEDICA's Role in Protecting Businesses as Victims
DEDICA supports businesses from the stage of drafting the criminal denunciation and report, accompanied by an initial evidence dossier so the investigation agency has grounds for rapid processing, while also representing or protecting the lawful rights and interests of the business as a victim or civil plaintiff throughout the investigation, prosecution, and trial. This includes preparing dossiers to prove each item of actual damage, requesting competent authorities to apply timely measures to seize and attach related assets, and following up to ensure the compensation portion is included in the judgment as a basis for future civil enforcement.
Conclusion
To recover assets when a business is a victim in a criminal case, four steps must be followed: (1) submit a denunciation or report with full initial evidence for the investigation agency to verify within 20 days to 2 months; (2) correctly determine the business's procedural standing, as either a victim or a civil plaintiff, to exercise the right to make requests; (3) proactively submit a dossier proving each item of actual damage and propose a specific compensation amount during the investigation, not waiting until the court hearing; (4) request the early application of measures to seize and attach related assets so that the judgment mandating compensation has assets to actually enforce. The most common mistake is passive waiting, assuming compensation will automatically arise from the criminal judgment without preparing evidence, or delaying the request to freeze assets, causing compensation on paper to be uncollectible in reality.
Every case involving a business's infringed assets has different details, charges, and procedural stages. DEDICA Law Firm accompanies businesses from the stage of drafting the denunciation, building the damage proof dossier, until the compensation is awarded and actually enforced. Contact DEDICA for a specific assessment of your business's case.
This content is for reference based on legal regulations at the time of drafting. Each case has its own details; please consult DEDICA lawyers for accurate advice.
