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Corporate criminal liability after the amendment

All corporations should take note: on 1 December 2016, the awaited amendment to the Corporate Criminal Liability Act entered into effect. A number of significant changes should not escape the attention of any corporate entity – whether a multinational corporation, a family-run business or a non-profit organisation.

Importantly, the amended act extends the number of criminal offences that corporate entities could be liable for from approximately 80 to approximately 200: corporate entities will be liable for nearly all the same criminal offences as individuals, with the exception of those explicitly excluded by law – offences where a corporate entity by its nature cannot be liable, such as bigamy. Furthermore, the use of effective (active) remorse has been limited: additional, primarily corruption-related criminal offences have been excluded from its application.

The most widely discussed issue is the possibility of a corporate entity’s exoneration: this only was included into the proposed amendment during the legislative process, by a legislative rider in the Chamber of Deputies. Eventually, it passed through both chambers of the parliament. Hence, a corporate entity may be exempt from criminal liability if it can prove to have exerted all reasonable efforts to prevent the offence.

For a corporate entity, the conviction of a criminal offence or even just the initiation of criminal proceedings may have rather unpleasant implications. Apart from posing an undesired threat to the company’s reputation, criminal prosecution also constitutes an obstacle for business combinations, for instance. It may also entail an increased risk for the members of statutory or supervisory bodies with respect to their duty to proceed with due care in exercising their offices: criminal prosecution of a corporation may, under certain circumstances, be deemed a breach of such duty, with all possible consequences. In extreme cases, it may lead to the criminal prosecution of the members of statutory or supervisory bodies for the criminal offence of violating trust obligations.

In view of the above, corporate entities should now more than ever focus on setting up a suitable crime prevention system. Effective, custom-tailored compliance mechanisms, inward and outward oriented, and procedures for their regular follow-up and update should be implemented by any corporate entity, from small family businesses to large multinationals. It is in the utmost interest not only of the entity itself, but also of its managing and supervisory bodies.