While corporations can be prosecuted for a range of crimes including environmental and regulatory offences, there have long been concerns the law does not fully hold such entities to account because it is difficult to pinpoint responsibility as decision-making can be dispersed.
In its paper, Corporate Criminal Liability, published last week, the Law Commission proposes ten reforms, including an offence targeting situations where a company fails to install measures to prevent their employees or agents committing fraud for the benefit of the company. ‘Failure to prevent’ offences could also be introduced for human rights abuses, ill-treatment or neglect and computer misuse.
Proposed reforms to the ‘identification doctrine’ would widen the scope for attributing liability to corporations for the conduct of senior management. Conduct would be attributable where a member of senior management engaged in, consented to, or connived in, the offence.
Other proposals include creating publicity orders to expose misdeeds, High Court civil actions based on Serious Crime Prevention Orders and introducing reporting requirements compelling large corporations to report on their anti-fraud procedures.
Law Commissioner, Professor Penney Lewis said there was ‘broad consensus that the law must go further’ to ensure corporations can be convicted of serious criminal offences.
Alun Milford, partner at Kingsley Napley, said: ‘Reform along these lines would have a very significant practical impact on the way that companies are dealt with by the criminal justice system.
‘Indeed, any legislation based on the Law Commission’s options could be the most significant changes in this field since the Bribery Act 2010.’
Liam Naidoo, partner at Hogan Lovells, said: ‘The Law Commission's options paper rightly rejects a “one size fits all” approach to reform of corporate criminal liability, and concludes that directors should not be made liable for neglect in relation to offences that presently require proof of dishonesty or intent.
‘This approach will be welcomed by corporates already under compliance burden. The possible introduction of a corporate offence relating to human rights abuses is a natural progression consistent with public discourse.’
