First, reconstruct the entire transaction; don't just look at whether the company lost money.

When a company's head, director, or senior executive is accused of breach of trust, the first thing to do is not simply ask, "Did the company really lose money?", but rather to reconstruct the entire transaction. Corporate criminal cases often involve authority, contracts, accounting, bank transactions, and internal decision-making simultaneously, and cannot be judged based on a single remittance or accounting summons.

Who proposed and made this decision?
What position and authority did he hold at that time?
Does it have a board of directors, shareholders' meeting, supervisor, or other authorization?
What is the purpose of the transaction and what are the expected benefits for the company?
Where does the money ultimately go?
Whether the individual or a third party has obtained any benefit.
What are the actual damages claimed by the company?
What contracts, emails, LINE records, accounting records, and bank records can be used to prove the background of a decision?

When a company's head is accused of breach of trust, what do prosecutors and police usually investigate first?

The core of determining breach of trust under criminal law is not merely the occurrence of losses in the company's accounts, but whether the perpetrator, while handling company affairs, violated their duties and had the intent to obtain illegal benefits for themselves or a third party, or to harm the company's interests, ultimately resulting in damage to the company's property or other interests. Prosecutors and police typically first confirm the perpetrator's identity, position, and scope of duties, and then examine whether duties were violated, subjective intent, attribution of benefits, and damage to the company.

Actual investigative materials may include the company's articles of association, board or shareholder resolutions, internal authorizations, contracts, quotations, invoices, bank statements, accounting books, emails, LINE/WhatsApp messages, and information on trading partners and related companies. Any instances of remuneration, commissions, special benefits, or funds flowing into the account of the individual or third parties will also be important areas of investigation.

Does a company necessarily commit breach of trust if it loses money in a transaction?

Not necessarily. Subsequent losses do not necessarily indicate that a crime was committed in the first place. Business activities can incur losses due to market changes, contract failures, price fluctuations, or insufficient information; misjudgments, failed transactions, and internal decision-making disputes must be distinguished from situations where one intentionally breaches their duties, seeks personal gain or benefits a third party, and causes damage to the company.

However, if the decision-making clearly exceeds the authorized scope, deliberately conceals conflicts of interest, the transaction terms deviate significantly from market conditions, or the funds actually flow back to the individual, the criminal risk may increase. Whether a crime has been committed still needs to be determined individually based on the information, procedures, documents, and fund flows available at the time of the decision-making, and criminal liability cannot be inferred solely from profits and losses afterward.

If the board of directors, shareholders' meeting, or internal company organization had previously agreed, would it still constitute a breach of trust?

Having a resolution or the boss knowing about it does not automatically absolve one of responsibility. It is still necessary to verify the content of the resolution, the scope of authorization, the completeness of information disclosure, whether conflicts of interest have been explained, whether the transaction terms are accurately presented, and whether the actual execution exceeded the approved scope. Conversely, a complete decision-making record can also be important information explaining the purpose of the transaction, the basis of authority, and the company's expected benefits.

In shareholder infighting or disputes over management rights, criminal prosecution is often involved.Company shareholders and business disputesSimultaneous occurrence; if it involves capital contribution, accounting books, or management rights, it can also be referred toShareholder disputes and company accounting issuesHowever, criminal liability still requires independent examination of evidence.

Have you received notification from the police station, investigation station, or district prosecutor's office?

If you are a company executive, director, or senior manager, and the case involves company funds, related-party transactions, asset disposal, or shareholder allegations of breach of trust, you can first prepare notification documents, company resolutions, contracts, cash flow records, and important communications. A lawyer can then reconstruct the background of the transactions and assess how the first statement or investigative court should proceed.

Telephone: 02-7709-3611 LINE: @fdlaw

When it comes to transactions, loans, or financial dealings between related parties, what situations are most likely to be questioned?

Common disputes include company loans to executives or related parties, advances, shareholder transactions, related-party transactions, undervalued asset sales, overvalued purchases, special commissions, consulting fees, bonuses, and the commingling of personal and company expenses. These transactions are not necessarily criminal; the key points remain the business purpose, approval procedures, documentation, pricing basis, flow of funds, ultimate beneficiaries, and actual damages.

If a company consistently uses a simplified accounting method, leaving only vaguely summarized vouchers afterward, it is necessary to supplement the background information from contracts, correspondence, payment terms, and performance results. Conversely, making or altering records on the spot may raise more questions, and original data should not be deleted, rewritten, or concealed.

When a defendant breaches trust, the most important thing is not to look at just one transaction, but to reconstruct the entire transaction.

Criminal case involving company executivesThe information is usually reorganized chronologically: who proposed the plan, who participated in the discussion, who approved it, why payment was made, how the contract was stipulated, what the company actually received, where the funds ultimately went, whether the individual profited, and whether the loss came from the decision itself, the performance process, or subsequent events.

At the same time, it is also necessary to compare whether the statements made by the relevant personnel at the time are consistent with the current accusations. For example, board briefings, quotation comparisons, payment approvals, acceptance documents, and accounting treatments may be scattered across different departments; only by placing the company's decision-making process and cash flow on the same timeline can the evidence be used to assess whether the prosecution's inferences about "breach of duty," "illegal gains," and "company damage" are supported by evidence.

What is the difference between breach of trust and embezzlement? Why are cases involving company funds often lumped together?

Breach of trust typically focuses on whether the person entrusted with handling the matter violated their duties and caused harm; embezzlement involves whether property originally held by another party in the course of business was subsequently appropriated according to the owner's wishes. Who legally holds or manages company funds, how they are disposed of, their job relationships, and their subjective intent can all affect the legal characterization. The specific charge stated in the complaint or notice does not replace a judgment based on the actual conduct and evidence.

After receiving a notification from the police station or district prosecutor's office, what documents should the company's person in charge prepare first?

First, save the police notices or summonses, known contents of the indictment, company registration information, articles of association, board and shareholder meeting minutes, authorization documents, relevant contracts, quotations, invoices, bank transactions, accounting vouchers, necessary general ledgers and subsidiary ledgers, emails, LINE/WhatsApp messages, and a list of relevant personnel. Then, organize the transaction timeline by date, marking the times of proposal, approval, signing, payment, performance, and disputes.

You can learn more before you arrive.Handling after receiving notification from the police stationandDistrict Prosecutor's Office Investigation and Investigation Court ProceduresAny incomplete information should be clearly marked as requiring further investigation. Do not destroy, modify, or conceal records, and do not guess amounts or dates from memory before verifying the documents.

In what situations is it advisable to hire a criminal lawyer before the first police questioning or investigative hearing?

Special caution should be exercised when dealing with cases involving large sums of money, multiple individuals or companies, shareholder infighting or related businesses, extensive accounting and banking records, long-term transactions, or simultaneous civil and shareholder lawsuits. If a search and seizure has already occurred, company computers or mobile phones have been confiscated, other executives are also named as defendants, or the case may involve breach of trust, embezzlement, and fraud, it is even more crucial to identify each transaction and the roles of each person before making a statement.

If your company or residence has been searched, please check first.Handling situations when a company or residence is searched by the policeThe importance of early review lies in the fact that the key to corporate criminal cases often lies in business documents, contracts, accounting treatments, and context, and cannot be fully revealed by a single verbal explanation.

Frequently Asked Questions

If a company loses money in a transaction, will the person in charge be charged with breach of trust?

Not necessarily. A comprehensive assessment must be made of the scope of the task, the subjective intent, the background of the transaction, the attribution of benefits, and the damage to the company. Crime cannot be presumed solely based on subsequent losses.

Can a shareholder directly sue a company executive for breach of trust?

Shareholders can file complaints or reports with investigative authorities, but whether a crime has been committed is still determined by the prosecutors and police based on the conduct, professional relationship, and evidence.

The board has already approved the transaction; could they still be accused of breach of trust?

There is still a possibility of charges being brought. It is necessary to verify whether the scope of the resolution, information disclosure, conflicts of interest, transaction terms, and actual implementation are consistent.

Is it necessarily a crime for a company executive to transfer company funds to a related company?

Not necessarily. It is necessary to examine the business purpose, authorization, documents, pricing, use of funds, ultimate beneficiaries, and whether the company has suffered any harm.

What documents should be prepared before the first police questioning after the defendant has breached trust?

The core documents are notification documents, articles of association and resolutions, authorizations, contracts, accounting and banking information, important communications and transaction timelines, and original records are retained.

Is it always necessary to investigate company books and bank statements in cases of breach of trust?

Most corporate payment cases require comparison of relevant accounting records and cash flows, but the scope depends on the disputed transactions and the prosecutor's focus, and does not mean that all company information is necessarily related to the case.

If the case progresses to further investigations such as searches, multiple interviews, or requests from the investigation bureau for explanations of accounting records and cash flows, you should first obtain [information/resources].Preparation of transcripts and materials when the company's responsible person was interviewed by the investigation bureauThen, based on the breach of trust dispute, the decision-making basis and the company's damages will be sorted out.

What to do if a company's head is sued for breach of trust? First, clarify the scope of authority, the purpose of the transaction, and the damages to the company.