Attorney Shao Shiwei | Texas Hold’em Club Involved in Case of Opening a Casino: Does a Nominee Legal Representative Bear Liability?

A client recently consulted me, stating that he served as a nominee legal representative for a friend’s Texas Hold’em club. However, just two months after opening, the club was reported to the authorities. The police raided the premises and made arrests. Several actual persons in charge of the club have been arrested and are currently detained in a detention center. The client is currently working in another city, and the police have not yet contacted him. Nevertheless, he is concerned about potential liability and is considering whether to return and surrender himself.

Therefore, does serving as a nominee legal representative carry criminal legal risks?

Serving as a nominee legal representative for others is clearly unlawful, yet it remains quite common in practice. For example:

An employer tells an employee, Xiao Wang: “Our company will establish a new subsidiary next month. I have observed your consistent performance. You will serve as the person in charge of the new company, and your salary will be increased by RMB 5,000.” (Xiao Wang is moved to tears.)

One day, Xiao Sun’s friend contacts him, saying: “I recently established a company. As you know, I work within the state system, so it is inconvenient for me to appear publicly; if my superiors find out, it would be disastrous. Could you serve as the nominee legal representative for my company? I will pay you this amount *** per month. What do you think?” Xiao Sun thinks, “This is easy money,” and readily accepts.

Xiao Tian’s boyfriend one day says to her: “Darling, I have established a company. Please serve as its legal representative.” Xiao Tian asks, “Why?” Her boyfriend replies, “From now on, what is mine is yours.” Xiao Tian beams with happiness...

Depending on the circumstances, the liabilities borne by a nominee legal representative vary. Based on past case-handling experience, Attorney Shao categorizes them into the following three types.

Author of this Article: Attorney Shao Shiwei

As mentioned above, in some cases, a nominee legal representative actually holds a position within the company or participates in relevant business activities. Based on the individual’s level of participation and status in company affairs, we can further distinguish three scenarios.

1. Position as an Ordinary Entry-Level Employee

Even being an ordinary employee is not a strong defense for exoneration. In practice, the role played by the employee within the company and in the alleged criminal conduct must be examined.

Scenario 1: The employee is deemed an accessory.

For instance, in Judgment No. 457 of the First Instance Criminal Case (2020) Xin 4002 Xing Chu, although the defendant Ma Moumou was the company’s legal representative, he was primarily responsible for financial matters and subordinate to the actual controller, Shi Mou. The court ultimately convicted Defendant Ma Moumou of organizing and leading pyramid selling activities and sentenced him to three years’ imprisonment.

Scenario 2: The employee does not constitute a crime.

For example, in Judgment No. 463 of the First Instance Criminal Case (2020) Shaan 0113 Xing Chu, although employee Xu Mou served as the company’s nominee legal representative, he appeared in the case as a witness to the unit crime. He himself did not bear criminal liability.

2. Holding Senior Positions Such as Executive or Manager

Positions such as director, supervisor, or senior executive hold decision-making authority over relevant company decisions. In such cases, even if serving as a nominee legal representative, the individual may be deemed a principal offender depending on their level of participation in the company’s operational decisions.

For example, in Judgment No. 4 of the First Instance Criminal Case (2020) Xiang 0481 Xing Chu, the court held that Defendant Zhao Mou, knowing he was a nominee legal representative, attended company-organized events and delivered speeches fabricating company performance in his capacity as chairman or person in charge to seek profits. Consequently, Zhao Mou was identified as a principal offender in the crime of fundraising fraud and sentenced to ten years’ imprisonment.

3. Providing Identity Cards and Bank Cards as Company Collection Account Information

If, while serving as a nominee legal representative, an individual also provides their identity card, bank card, SIM card, and other information to assist the company in collecting payments from external parties during its operations, then, in practice, the nature of the act of providing collection accounts will be determined based on the individual’s subjective knowledge of the illegal or criminal conduct.

For example, in Judgment No. 181 of the First Instance Criminal Case (2019) Hei 0109 Xing Chu, Defendant Liu Moumou, as the company’s legal representative, knowing the company’s investment model, opened four bank accounts in his personal name for the company to collect membership investment funds and make repayments to members. The court convicted Liu Moumou of illegally absorbing public deposits.

Furthermore, in Judgment No. 40 of the First Instance Criminal Case (2022) Xiang 0225 Xing Chu, the court held that the defendant provided his identity card and SIM card to establish a “shell” company, served as the company’s nominee legal representative, and opened company accounts used for settling funds derived from illegal and criminal activities, thereby constituting the crime of aiding information network criminal activities.

A more common situation is where an individual serves as a company’s nominee legal representative to receive fixed benefits, without participating in the company’s actual business activities. In such cases, it is necessary to distinguish the individual’s level of knowledge regarding the company’s specific operational conduct.

1. Knowledge of the Company’s Business Content

If arrested for serving as a nominee legal representative, the individual will likely argue during interrogation: “I was unaware; I did not know about others’ illegal or criminal acts; I only received affiliation fees.” At this point, a comprehensive determination must be made by combining statements from other individuals and the facts established in the case.

For example, in Judgment No. 1064 of the First Instance Criminal Case (2017) Chuan 0106 Xing Chu, although the defendant claimed he was merely a nominee and unaware of the company’s fraudulent projects, other company personnel testified that the defendant occasionally visited the company and handled daily affairs. Combined with the defendant’s act of handing over bank cards used for financing to others for custody, the court held that the defendant adopted a laissez-faire attitude toward the authenticity of the company’s projects and the scale of fund absorption. Ultimately, the defendant was convicted of fundraising fraud and sentenced to eleven years and six months’ imprisonment.

2. Received Fees but Was Unaware of the Specific Business Content

If the individual was completely unaware of the company’s alleged illegal acts and merely received benefits, there is a greater possibility for lawyers to pursue a not-guilty defense on behalf of the individual. This is because criminal cases substantively examine whether the individual committed specific criminal acts. Merely receiving benefits from others without substantive participation in their illegal or criminal conduct lacks criminal illegality.

However, nothing is absolute. For example, see the reasoning portion regarding the individual in Judgment No. 1582 of the First Instance Criminal Case (2020) Yue 0606 Xing Chu:

In such circumstances, there is a relatively high probability that the conduct will not be considered a crime.

For example, in the illegal business operation case (2019) Wan 0104 Xing Chu No. 330, a boyfriend used his girlfriend’s identity card to register her as the company’s nominee legal representative, but the girlfriend was unaware of the company’s affairs. Similarly, in case (2020) Zhe 0225 Xing Chu No. 139, the client’s identity card was borrowed by his younger brother, resulting in his becoming a nominee legal representative of a certain company. In both cases, the nominee legal representatives were listed as witnesses in the proceedings and were not held criminally liable.

Conclusion:

China is not a case-law jurisdiction; therefore, the cases mentioned in this article serve only as references. In specific cases, it is still necessary to consult professional lawyers to analyze the particular circumstances of the individual’s involvement accurately to determine whether the individual constitutes a crime and, if so, what charges may apply.

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