How to Deal with Gifts Related to Business activities?

Courtesy social among companies is very common. At the end of each year, companies would organize annual party, customer appreciation party and other similar business activities. The organizer used to prepare different gifts for different participations, and even arrange lucky draws. Where an employee participates in a business event on behalf of a company, and receives a gift, then who shall be the owner of the gift?

Some people think that this is a traditional custom, it is appropriate for the employee to own the gift. Other people think that the organizer plans to give the gift to the company, and the employee just receives the gift on behalf of the company. So, the gift shall be owned by the company. It seems that both opinions are reasonable more or less. In practice, different companies deal with this kind of gift differently. Then, from the perspective of business ethics and compliance, how should companies deal with such gift?

A basic principle in dealing with such gift is that where the value of a gift goes beyond the usual business practice, it shall not belong to the employee, and the company shall make accounting after received such gift. Otherwise, such behavior might be deemed as a commercial bribe. According to the revised “Anti-Unfair Competition Law”, if both parties have made accounting for giving and receiving such gift, then it shall not be deemed as a commercial bribe. But if a party gives a commission secretly to the employee of the counterparty of a transaction, such behavior shall be deemed as a commercial bribe. Therefore, if a company fails to manage the behavior that an employee receives gifts with high value, then there would be a huge potential risk.

What is the standard for the usual business practice? There is no laws or regulations have prescribed articles on this topic in normal civil circumstances. In practice, the judicial authorities would make a decision based on the local practice and the specific details of each case. For example, in the case (2016) Zhe 02 Min Zhong No.2013 civil judgement, the court held that, the employee received the marriage gift in public instead of secretly; the value of the gift giving by the responsible person of the supplier was amount to RMB800 to 1000, which is reasonable in Ningbo; such behavior is a usual business practice. However, in similar cases, some other courts might analyze whether the sender and the receiver are relatives or friends, the previous interaction are like friends, or the receiver’s position might have influence on the transactions and so on. Then these courts might decide such similar behavior shall be deemed as a commercial bribe. Therefore, such cases shall be decided case by case. Currently, many companies have set RMB200 as the limitation of the value of such gifts, by refer to the “Regulations of the State Council on Giving and Receiving Gifts in Public Service Activities.”

In view of the above, from the perspective of compliance, it is recommended to set rules on regulating the gifts sent by the other companies in the employer’s internal rules and regulations.

A company could set different requirements based on its own needs. For example, a company could require employees to hand over gifts to the company; or employees could keep the gifts with the value less than a specific amount, e.g. RMB500, and return the gifts with the value more that that amount, if it is not appropriate to return, the employee shall hand over such gifts to the company.

In addition, it is recommended that where a company has released its relevant internal rules and regulations, the company shall implement the relevant requirements and keep retain relevant evidence. On the one hand, such recommendation could help a company to reduce the risks to its reputation, which might be affected due to employees’ bribes behaviors. On the other hand, such recommendation could help a company to prove the employee’s bribery behavior has no relationship with it, which means the company has not violated paragraph 3, Article 7 of the “Anti-Unfair Competition Law”.