Summary: Due to various restrictions on financing from banks and other financial institutions, it is very common for small and medium-sized enterprises to raise funds for survival and development through private financing. However, according to the 2010 Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Laws in the Trial of Criminal Cases of Illegal Fundraising, even if fundraisers use the raised funds for legitimate production and business activities, they still encounter the red line of conviction for the crime of illegally absorbing public deposits. There are three different opinions in the theoretical and practical circles on whether the behavior of fundraisers raising funds for legitimate production and business activities constitutes the crime of illegally absorbing public deposits, with the mainstream being selective conviction and punishment based on the consequences caused by the behavior. The author believes that fundraising by fundraisers for legitimate production and business activities is reasonable and does not meet the legislative purpose of cracking down on the crime of illegally absorbing public deposits. Such fundraising behavior should not be treated as a crime.

Keywords: illegal absorption of public deposits, private lending, finance

1. Question raising

Article 176 of the Criminal Law of the China, promulgated in 1997, established the crime of illegal absorption of public deposits, stipulating that "illegal absorption of public deposits or absorption of public deposits in disguised form disturbs the financial order", and convicted and sentenced the crime of illegal absorption of public deposits. Currently, private financing is very active, and it is common for individuals and enterprises to raise funds through private financing channels rather than formal financial financing channels. This is because the current financing system in our country's financial system is not sound enough, and financing channels are not smooth enough. It is difficult for enterprises, especially small and medium-sized private enterprises, to obtain the necessary funds for their development in a timely and legal manner from financial institutions such as banks. For the sake of survival and development, a large number of enterprises have turned to seeking support from private capital, through private lending, membership, and other means, at the cost of higher than bank interest rates, to absorb funds from the public for legitimate production and business activities. In coastal areas with highly developed private economy, such as Zhejiang, this phenomenon is particularly prominent. However, according to the "Measures for the Suppression of Illegal Financial Institutions and Illegal Financial Business Activities" issued by the State Council in 1998, such fundraising activities are classified as "illegal absorption of public deposits" or "disguised absorption of public deposits". According to Article 3 of the 2010 Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fundraising, the criminal prosecution standards for the crime of illegally absorbing public deposits are as follows: Individuals who absorb an amount of 200000 yuan or units who absorb an amount of 1 million yuan, individuals who deposit with more than 30 people or units who deposit with more than 150 people, individuals who cause direct losses of 100000 yuan to depositors, or units who cause direct losses of 500000 yuan to depositors, can all be convicted and punished for the crime of illegally absorbing public deposits. This article will explore how to view this type of fundraising used for legitimate production and business activities, whether to impose a unified punishment, recognize its legality, or hold the fundraiser criminally responsible in a differentiated manner.

2. Different viewpoints on the crime and non crime of using fundraising funds legally

(1)Three different perspectives

The objective behavior of fundraisers who absorb funds from the public for legitimate production and business activities fully meets the formal requirements of the crime of illegally absorbing public deposits. Therefore, there is significant controversy in the theoretical and practical fields regarding whether this should be criminalized as the crime of illegally absorbing public deposits. There are three main viewpoints:

1.The first viewpoint holds that as long as the fundraiser's behavior of absorbing public funds complies with the "Measures for the Suppression of Illegal Financial Institutions and Illegal Financial Business Activities", its nature of behavior belongs to the illegal absorption of public deposits. As long as it complies with one of the prosecution standards for the crime of illegal absorption of public deposits determined in Article 3 of the "Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fundraising", Criminal responsibility should be pursued.

2. The second viewpoint holds that the crime of illegally absorbing public deposits is a crime of legal purpose. If the fundraiser absorbs public deposits and the purpose of their behavior is to use the absorbed deposits for capital and currency operations, engage in the same or similar activities as financial institutions, such as issuing loans, financial guarantees, and borrowing funds, and earn interest differences, then the behavior of the fundraiser constitutes the crime of illegally absorbing public deposits, Otherwise, the act of absorbing deposits that do not have this purpose does not constitute the crime of illegally absorbing public deposits. Therefore, the fundraiser's absorption of funds for legitimate production and business activities does not constitute the crime of illegally absorbing public deposits.

3.The third viewpoint holds that although the external form of the fundraiser's absorption of public deposits for legitimate business activities meets the objective requirements of the crime of illegally absorbing public deposits, considering that this fundraising behavior to some extent alleviates the financial pressure on enterprise production and operation, is conducive to socio-economic development, and has good economic and social effects, as long as the fundraiser does not cause economic losses to the depositor, It should be considered that the circumstances are significantly minor and not treated as a crime of illegally absorbing public deposits. But if the behavior of the fundraiser causes significant economic losses to the depositor, its behavior has considerable social harm. Not holding it criminally responsible is not conducive to social stability, and the fundraiser should be held criminally responsible according to the crime of illegally absorbing public deposits. The Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Laws in the Trial of Criminal Cases of Illegal Fundraising states that "the funds (absorbed) are mainly used for normal production and business activities, and if they can be promptly refunded, they can be exempted from criminal punishment; if the circumstances are significantly minor, they shall not be treated as crimes".

(2) Comment on viewpoints

The above three viewpoints elaborate and analyze from different perspectives and positions whether fundraising for legitimate production and business activities can be criminalized. The author has different opinions on the above viewpoints:

1.The first viewpoint does not take into account the legality and rationality of the existence of private financing, which can easily lead to the generalization of criminalization. According to the 1998 Measures for the Suppression of Illegal Financial Institutions and Illegal Financial Activities, illegal absorption of public deposits refers to activities that, without the approval of the People's Bank of China, absorb funds from unspecified objects in society, provide vouchers, and promise to repay principal and interest within a certain period of time; The disguised absorption of public deposits refers to activities that, without the approval of the People's Bank of China, do not absorb funds from unspecified objects in society in the name of absorbing public deposits, but promise to fulfill obligations similar to the nature of absorbing public deposits. The first view is that illegal deposit taking and disguised deposit taking behavior itself causes the savings of the people to circulate in the banking system, weakens the bank's ability to absorb deposits and credit expansion, and affects the regulatory and implementation effects of the national monetary macro control policies. Therefore, if their behavior is established, the harmful consequences are established, and the crime is constituted. However, from the textual provisions of the crime of illegally absorbing public deposits, the act of absorbing deposits is composed of "disrupting financial order". Is it sufficient for fundraisers to absorb public deposits for legitimate production and business activities to achieve the effect of "disrupting financial order"? Obviously farfetched. The crime of illegally absorbing public deposits "is always debated on the one hand, but on the other hand, it is already the highest crime in the current financial industry. The first viewpoint is a rigid understanding of legal provisions, which maintains that financial order is a monopoly of financial institutions. This is also inconsistent with the concept of encouraging the standardized development of private financing in legislation and policies, and is disconnected from reality.

2.The theoretical premise of the second viewpoint is that the crime of illegally absorbing public deposits is a purposeful crime. The "intentional crime" in criminal law requires that the subjective composition of a crime must have a specific criminal purpose. Without a specific criminal purpose, even if the objective behavior meets the criminal constitution, it will not constitute a crime due to its social danger not reaching the level of criminal responsibility. According to Article 176 of the Criminal Law of the China, the crime of illegal absorption of public deposits refers to the act of illegal absorption of public deposits or absorption of public deposits in a disguised form in violation of national financial regulations, which disturbs the financial order. The article itself does not require the perpetrator to have a specific purpose, and there is also considerable difficulty for investigative agencies to obtain evidence for subjective purposes. The object of the crime of illegally absorbing public deposits is the national financial order. Even if fundraisers use the funds for illegal purposes, as long as they do not have a subjective purpose of disrupting financial order, they can escape punishment, which is clearly not conducive to combating crime. Violations of the national financial order are more often caused by objective behavior.

3.The third viewpoint defines the crime of illegally absorbing public deposits as a "consequential offense", which belongs to the typical "serious consequences theory", and the result is that the offense is ambiguous. How to characterize the losses caused to depositors by fundraising activities? A large number of private loans have no agreed repayment date. According to the Contract Law of the China and relevant regulations, the lender can claim the loan is due at any time and demand immediate repayment. According to Article 3 (4) of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fundraising, punishment can only be exempted if all funds are cleared. The fundraiser will raise funds to invest in legitimate production and operation activities, and generating benefits requires varying investment cycles. If the lender claims repayment before the income is generated, it will inevitably cause the funds to be unable to be repaid, and such situations should not be recognized as losses. How to determine the amount of losses based on the crime? Whether it is determined in accordance with Article 3, Paragraph 1, Item 3 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fundraising that individuals absorb funds and cause direct economic losses of more than 100000 yuan and units absorb funds and cause direct economic losses of more than 500000 yuan is clearly not clear. The fate of the fundraiser depends on the success or failure of the investment, as judged by the outcome. Success in investment brings joy to everyone; If the investment fails, the punishment will be imposed, and it is obviously unreasonable to throw stones in the well.

3. Raising funds for legitimate production and business activities does not constitute the crime of illegally absorbing public deposits

The author believes that fundraisers who raise funds for survival and development needs and use them for legitimate production and business activities should not be convicted of the crime of illegally absorbing public deposits, regardless of whether they can repay the funds raised.

(1)Private finance has considerable rationality

Funds are as important to enterprises as blood is to the human body. The active private financing has exposed the imbalance between the demand and supply of funds in the financial system. A large number of small and medium-sized enterprises need financing for survival and development. But the current financial system in our country monopolizes the formal supply of funds, and the threshold set blocks the financing channels of small and medium-sized enterprises. The low interest rate savings policy of banks and the rise in CPI index and inflation rate have led to the inability of private capital to maintain and increase value in banks, and the unwillingness of people to deposit idle funds in banks. All of this has given rise to a large number of private financing activities. The crime of illegally absorbing public deposits against the section of raising funds for legal production and operation activities is tantamount to hanging the "Sword of Damocles" on the head of the fund raiser to block private financing, which is not conducive to the improvement of the formal financial system. The case of "Sun Dawu" reflects that the state hopes to regulate illegal financing from the legal level, but the legal regulation has not achieved the desired effect, but there has been a double emotion of "too wide scope of attack and insufficient intensity of attack". Restricting the source of corporate funds is equivalent to restricting the development of enterprises, which is the traditional stubborn thinking of the planned economy system.

(2)The conviction does not meet the legislative purpose of illegally absorbing public deposits.

The legislative purpose of the crime of illegally absorbing public deposits is to prohibit non-financial institutions from using the funds absorbed for credit activities, and to prohibit non-financial institutions from engaging in financial activities. Fundraisers raise funds not for capital operations but for production operations, and legitimate production and operation activities are aimed at obtaining normal operating profits. The legitimate deposit taking behavior of financial institutions aims to obtain interest spreads through the financing of funds, such as lending and credit granting. The purpose of financial institutions engaged in financial business is significantly different from raising funds for legitimate business activities. These two types of profit seeking behaviors are allowed by law and do not intersect with each other, and should not have different legal consequences.

4. End

Fundraising by fundraisers for the agreed legitimate production and operation purposes is a normal private financing behavior. Any economic activity carries certain risks, and both financing parties should have the psychological preparation to bear the risks. Even for financial borrowing within the formal system, banks, as the core of financial institutions, also need to bear the risk of not being able to collect loans. The inability to repay due to the failure of the fundraiser's operation after raising funds is also a normal business risk category, rather than a result of the fundraiser's subjective pursuit. Although this behavior has social harmfulness and should bear certain administrative and civil responsibilities, it does not constitute a criminal offense and does not infringe on the relevant legal interests protected. According to the principle of "legality for crimes and punishments", it cannot be convicted. Therefore, those who raise funds for legitimate production and business activities should not be convicted and dealt with as illegally absorbing public deposits.

References

[1] Zhou Yang and Tang Wanxin: "Or China's Crime and Punishment", "Economy", Issue 3, 2006.

[2] Yu Heming: Illegal Fund Raising in the Criminal Law - Analysis of the "Puzhen" Case and Sun Dawu Case as Samples, Financial Law Court, 2004, Issue 111.

[3] Li Xunwen: "How to handle the boundary between private financing and illegal fundraising in the context of the financial crisis", "Law and Society", Issue 22, 2009.