Llinks Corporate Compliance & Legal Alert (March 2026)

Spotlight on News

1. SAMR issued the Regulations on Trade Secret Protection and Supreme Court released guiding cases, strengthening trade secret protection.

On February 24, 2026, the State Administration for Market Regulation (SAMR) promulgated the Regulations on Trade Secret Protection (Order No. 126) (hereinafter referred to as the "Regulations"), which will take effect on June 1, 2026. Upon its entry into force, the Several Provisions on Prohibiting Acts of Infringement of Trade Secrets (Order No. 41), issued by the former State Administration for Industry and Commerce on November 23, 1995, will be simultaneously repealed. As China's first comprehensive administrative rules on trade secret protection, the Regulations implements the Anti-Unfair Competition Law (2025) and addresses emerging challenges in the digital economy. It provides detailed provisions on the definition of trade secrets, types of infringing acts, and legal liabilities, offering clearer and more practical guidance for businesses.

On February 28, 2026, the Supreme People's Court released the 49th batch of guiding cases (Nos. 273-279). Guiding Case No. 273 provides important guidance on determining trade secret misappropriation. Following the "access plus substantial similarity minus lawful source" burden-of-proof rule under Article 39 of the Anti-Unfair Competition Law (2025), the Court held that if an alleged infringer recruits personnel from the right holder to obtain trade secrets and produces related products in an unreasonably short time compared to independent development, misappropriation may be presumed, shifting the burden of proof to the alleged infringer. In this case, the alleged infringer failed to prove a lawful source, and the Court found misappropriation. This ruling reduces the burden on right holders and strengthens trade secret protection.

2. Ministry of Justice and four other authorities released the Financial Law (Draft) for public comment.

On March 20, 2026, the Ministry of Justice, the People's Bank of China, the National Financial Regulatory Administration, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange published the Financial Law of the People's Republic of China (Draft) (hereinafter referred to as the "Draft") on their official websites for public comment, with the comment period ending on April 19, 2026.

The Draft consists of 11 chapters and 95 articles, setting out systematic provisions on financial regulation, the modern central banking system, governance of financial institutions, and legal liabilities. In particular, Article 24 of the Draft provides that directors and senior management of financial institutions owe duties of loyalty and diligence, shall not abuse their authority, nor harm the legitimate rights and interests of relevant stakeholders. Supervisors also owe corresponding duties. Financial regulatory authorities may take supervisory measures against violators in accordance with the law. Additionally, Article 56 of the Draft allows authorities to restrict compensation and benefits to directors, senior management, and other directly responsible personnel, order adjustments to such personnel, and recover compensation and benefits within a certain period. Article 57 of the Draft further clarifies that if such personnel fail to return compensation or benefits within the prescribed period, authorities may apply to the people's court for enforcement.

Compared with previous departmental rules, the Draft introduces two groundbreaking changes. First, it elevates the compensation recovery mechanism from departmental rules to a basic national law, which, if enacted, would create uniform legal binding force across banking, securities, insurance, funds, and trusts. Second, it shifts the implementation model from voluntary arrangements by financial institutions to mandatory orders by regulatory authorities, thereby granting the mechanism administrative enforceability and strengthening regulatory rigor once the law takes effect. Overall, as the first foundational law in China's financial sector, if the Draft is formally adopted, it will solidify the institutional foundation for financial regulation and risk prevention, supporting the stable and high-quality development of the financial industry.

Legislation Updates

1. The General Office of the Central Committee of the CPC and other authorities revised the Rules on Integrity in Employment for Leaders of State-Owned Enterprises.

On February 28, 2026, the General Office of the Central Committee of the CPC and the General Office of the State Council issued the revised Rules on Integrity in Employment for Leaders of State-Owned Enterprises (hereinafter referred to as the "Rules"), which took effect immediately.

The Rules is aligned with relevant national laws and regulations and further refines its scope of supervision. It covers wholly state-owned enterprises as well as de facto state-controlled enterprises that can be effectively controlled through contractual arrangements. The Rules targets key management personnel of state-owned enterprises, including members of leading Party organizations, directors, senior managers, and other key personnel appointed or managed by Party organizations at various levels.

In terms of conduct, the Rules combines positive requirements with a negative list. It sets out five basic norms such as loyalty to the Party and performance of duties in accordance with the law-while clearly prohibiting seven types of violations, including abuse of power, seeking personal gain, and improper selection and appointment. To ensure effective implementation, the Rules strengthens the responsibilities of Party committees, discipline inspection and supervision agencies, and regulatory authorities, introduces oversight by external directors and financial supervision, and improves internal management in areas such as connected transactions and integrity culture.

On accountability, the Rules provides detailed rules in five areas: imposing disciplinary sanctions in accordance with laws and regulations; deducting or recovering performance-based salaries and incentive benefits; ordering the return of illegal gains; setting industry restriction periods based on the nature of violations; and establishing a precise accountability mechanism. The Rules also clarifies circumstances under which accountability is exempted and protects the legitimate rights and interests of enterprise leaders by correcting false accusations.

2. Tianjin Federation of Trade Unions, Higher People's Court, and Human Resources and Social Security Bureau jointly issued guidelines to standardize the procedure for informing trade unions before unilateral termination of employment contracts.

On March 4, 2026, the Tianjin Federation of Trade Unions, the Tianjin Higher People's Court, and the Tianjin Municipal Human Resources and Social Security Bureau jointly issued the Guidelines on Standardizing Unilateral Termination of Employment Contracts by Employers (hereinafter referred to as the "Guidelines"), aimed at regulating unilateral termination in accordance with the law. 

The Guidelines specifies that an employer shall notify its trade union of the reasons for termination five working days in advance. For employers without a trade union, the notice shall be given to the higher-level trade union, the township (subdistrict) trade union, or the district federation of trade unions where the employee works. These provisions refine the procedural requirements under Article 43 of the Labor Contract Law and clarify the specific entities to be notified when no trade union exists, filling an operational gap in local practice and confirming that the absence of a trade union does not excuse the notice obligation.

Additionally, the Guidelines emphasizes that arbitration commissions and courts, when hearing termination disputes, shall review whether the employer has completed the trade union notification procedure and determine whether procedural violations have occurred based on applicable laws and judicial interpretations. By making the notification obligation a key element in arbitration and judicial review, the Guidelines strengthens the legal enforceability of procedural compliance in employment termination.

3. CSRC and AMAC respectively issued measures and detailed rules (draft) on private fund information disclosure.

On February 24, 2026, the China Securities Regulatory Commission (CSRC) issued the Measures for the Supervision of Information Disclosure by Private Investment Funds (hereinafter referred to as the "Disclosure Measures"), effective September 1, 2026. To further refine disclosure requirements, the Asset Management Association of China (AMAC) released the Detailed Rules for Information Disclosure by Private Investment Funds (Draft for Comment)(hereinafter referred to as the "Disclosure Rules") on March 10, 2026, with the public comment period ending on March 27, 2026.

The Disclosure Measures extends disclosure responsibilities from managers to custodians and distributors. Article 32, for the first time, imposes a duty of cooperation on shareholders and actual controllers. Accordingly, managers cannot evade liability by delegating disclosure to third parties, distributors must not alter disclosed information, and custodians bear a duty of review—violators may be held independently or jointly liable. The Measures also requires managers to designate their compliance department as the disclosure management unit, with a senior executive serving as the disclosure officer, making disclosure an internal mandatory compliance obligation.

The Disclosure Rules further solidifies disclosure compliance as a statutory organizational duty, requiring managers to establish sound disclosure systems and appoint a dedicated department and a senior executive as the disclosure officer. At the systemic level, managers must complete disclosure filings on the CSRC's designated platform, though such filing does not constitute disclosure itself; they are still required to proactively disclose information through agreed channels. This dual-track mechanism ensures that information is both "seen" and "traceable".

Case Study

1. Supreme Court Case: an agreement to waive social insurance contributions is invalid, and an employee may rescind the employment contract and claim economic compensation on such grounds.

• Facts

On July 28, 2022, Zhu joined Company A as a security guard, assigned to work at a certain entity, with a monthly salary equal to Beijing's minimum wage for that year. The parties also signed a declaration stating that Zhu voluntarily requested not to be enrolled in the local social insurance scheme, and that the corresponding contributions would be paid to Zhu as an allowance. During Zhu’s employment, Company A did not pay social insurance contributions for Zhu. On August 29, Zhu resigned, citing Company A's failure to pay social insurance. Zhu subsequently filed an arbitration application with the Beijing Xicheng District Labor and Personnel Dispute Arbitration Commission, seeking wages, overtime pay, and economic compensation for rescission of the employment contract. The arbitration commission ordered Company A to pay Zhu RMB 3,862 in wages but dismissed Zhu’s other claims.

Dissatisfied with the award, Zhu filed a lawsuit. On November 30, 2023, the Beijing Xicheng District People's Court issued a first-instance judgment denying Zhu’s claim for economic compensation. Zhu appealed. On June 11, 2024, the Beijing Second Intermediate People's Court reversed the lower court's decision and ordered Company A to pay Zhu RMB 2,409.63 in economic compensation. Zhu later applied for a retrial, but the Beijing Higher People's Court dismissed the application, rendering the second-instance judgment final.

• Judge’s Viewpoint

The Beijing Higher People's Court held that the key issues in this case were whether the declaration signed between Zhu and Company A was valid, and whether Company A should pay economic compensation for rescission of the employment contract. Pursuant to the relevant provisions of the Labor Law and the Labor Contract Law, it is a mandatory legal obligation for employers to contribute social insurance premiums for their employees. Any agreement or promise by which the employee waives social insurance contributions shall be null and void as it violates mandatory provisions of law. Moreover, employees often have limited bargaining power when entering into employment contracts, and waiving social insurance is frequently a reluctant choice made to secure a job. Thus, regardless of whether the parties have agreed to waive social insurance, if the employer fails to pay such contributions, the employee is entitled to rescind the contract and claim compensation.

In this case, the declaration signed by Zhu agreeing that Company A would no longer pay social insurance contributions for Zhu, with the corresponding amount paid as an allowance, essentially constituted an agreement between the parties that Company A was not required to pay such contributions. Because this agreement violates the mandatory provisions of the Labor Law and the Social Insurance Law, it is null and void. Since Zhu rescinded the contract on the ground that Company A failed to pay social insurance, Company A is liable for economic compensation.

2. Beijing No.3 Intermediate People’s Court: multiple lawsuits may undermine trust to the extent that reinstatement is no longer viable, and the employee's request for reinstatement must be rejected.

• Facts

Jiang joined Company B on March 9, 2015, under an open-ended employment contract. On May 7, 2019, Company B terminated his employment. Jiang filed for arbitration, seeking to revoke the termination and reinstate the contract. After arbitration and court proceedings, the final judgment ordered the parties to continue performance of the contract.

Thereafter, the parties engaged in multiple rounds of arbitration and litigation over other related matters. On September 15, 2023, Company B again terminated Jiang's employment, citing a significant change in objective circumstances that made continued performance impossible and the failure to reach an agreement after consultation. Jiang filed for arbitration again, seeking to revoke the termination notice and reinstate the contract.

• Judge’s Viewpoint

The Beijing No.3 Intermediate People’s Court held that Company B's actions-such as mergers, personnel changes, and asset or business transfers-were business decisions made based on its own operational considerations, and did not constitute "a significant change in the objective circumstances underlying the conclusion of the employment contract." Accordingly, Company B's termination on such grounds lacked justification and constituted an unlawful termination.

As to whether the employment contract should be reinstated, the Court noted that the personal nature of employment relationships imposes a higher degree of mutual trust between the parties, which can easily erode amid disputes and conflicts. Once trust breaks down, the relationship becomes strained, undermining the foundation for a stable and harmonious employment relationship. In this case, since 2019, the parties had engaged in multiple rounds of arbitration and litigation concerning termination, reinstatement, wage losses, and other matters. Mutual trust between them had been exhausted, and the basis for continuing the employment contract no longer existed. The Court thus affirmed the lower court's determination that reinstatement was no longer viable, and denied Jiang's appeal for continued performance of the contract.

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