Reforms proposed to facilitate criminal prosecution of corporates

The Law Commission has now published its options paper on possible reforms to the law on corporate criminal liability; in particular, to the general rule that for offences requiring a particular mental state, a corporation will only be guilty of an offence if a person representing its “directing mind and will” had the requisite mental state. The paper has put ten options for reform on the table. Among the more eye-catching of those are:

• Criminal conduct to be attributed to a corporation if a member of its “senior management” has engaged in, consented to, or connived in the offence. In this context, a member of senior management would be any person who plays a significant role in decision making about how the whole or a substantial part of the organisation’s activities are to be managed or organised. The report suggests it may be appropriate for an organisation’s CEO and CFO to be automatically considered to be members of its senior management.
• A new corporate criminal offence of failure to prevent fraud by an associated person. This offence would be committed where an associated person commits an offence of fraud with intent to benefit the corporation, or to benefit a person to whom the associated person provides services on behalf of the corporation. The corporation would have a complete defence where it could prove that it had in place such prevention procedures as was reasonable in the circumstances, or that it was reasonable not to have any such procedures in place.

The Law Commission’s summary paper, and the full report itself, can be found at: Corporate Criminal Liability | Law Commission. At this stage, these are of course only options for the government to consider and it will be some time before we have clarity on which (if any) might become law. That said, the Law Commission’s paper certainly chimes with recent calls for extensions to the basis on which corporates can be held liable for criminal conduct and the introduction of further “failure to prevent” corporate criminal offences (as Burges Salmon has previously discussed). Further legislation in this area seems inevitable and those charged with managing organisations’ compliance procedures and risk profiles will need to monitor the government’s response and subsequent developments closely.

If you would like to discuss anything arising from the Law Commission’s paper or any other questions arising in this area, please get in touch with Guy Bastable, David Hall, Sam Aldous and/or Andrew Matheson. Burges Salmon’s Corporate Crime team specialises in advising corporate clients, and their boards and directors, on crisis management and corporate and director liability, conducting internal investigations, managing corporate engagement with regulators and responding to complex investigations and prosecutions by the Serious Fraud Office, the Financial Conduct Authority, the National Crime Agency, HM Revenue and Customs, the Health and Safety Executive, the Environment Agency and many others, including those in foreign jurisdictions. We regularly help clients to review legal risk and map out the ESG factors most relevant to them. We assist with setting up systems, running training programmes, drafting protocols and reviewing key documents to minimise compliance risks and maximise the opportunities available to businesses.

This article was written by Andrew Matheson.

Further legislation in this area seems inevitable and those charged with managing organisations’ compliance procedures and risk profiles will need to monitor the government’s response and subsequent developments closely.