The Law Commission has today [Friday 10 June] published its
options for the Government for how it can improve the law to
ensure that corporations are effectively held to account for
committing serious crimes.
The Commission was asked by the Government to carry out a review
of the law on corporate criminal liability, and present a set of
options for strengthening the law, in a way that does not
overburden businesses.
The review followed concerns that the law falls short in
adequately holding corporations – especially large companies – to
account, particularly for economic crimes such as fraud.
Under current law, companies and other “non-natural persons” can
be prosecuted for a range of crimes in England and Wales, which
can also include environmental or regulatory offences.
While there were over 5,000 convictions for corporations and
other bodies in 2020 alone, there is widespread concern that the
law does not fully hold such entities to account for criminal
acts, as there is often difficulty in pinpointing responsibility
within organisations, where decision-making can be dispersed.
In its new paper, the Law Commission today presents ten reform
options to the Government. The proposed reforms are designed to
ensure that corporations of all forms can be properly convicted
of crimes, without placing an administrative burden on
law-abiding businesses.
The options for reform to corporate criminal liability include
widening the scope for attributing liability to corporations for
the conduct of senior management – which would reform the
established “identification doctrine”.
It also contains the option of extending “failure to prevent”
offences so that they capture other economic crimes by
corporations, including an offence of “failure to prevent fraud”.
This would cover a situation in which the company has failed to
put measures in place to prevent their own employees or agents
committing fraud for the benefit of the company.
New financial penalties and reporting requirements for
corporations are also presented as possible reform
measures.
Commenting on the reform options set out to Government, Professor
Penney Lewis, the Law Commissioner for Criminal Law,
said:
“There is broad consensus that the law must go further to ensure
that corporations – especially large companies – can be convicted
of serious criminal offences, such as fraud.
“It’s imperative that we have the right mechanisms in place to
allow companies to be effectively held to account for misconduct
carried out in their name. Our ten options for improving the law
on corporate criminal liability mean that the Government now has
several viable routes to reform at its disposal.”
Professor , the Law Commissioner for
Commercial and Common Law, said:
“It’s essential that any new reforms to hold corporations to
account for crimes do not place an undue regulatory burden on
law-abiding companies.
“Our options for reforming the law on corporate criminal
liability are designed to strike a balance between ensuring that
the law works well to punish corporate entities when misconduct
is committed on their behalf, whilst avoiding a new suite of
burdensome administrative requirements for businesses.”
Corporate Criminal Liability: The Law Commission’s ten
options for reform
The Commission’s possible options presented to the Government
for law reform include:
1. Retain the current general rule of criminal liability applied
to corporations – the “identification doctrine” – as it
stands.
2. Allow conduct to be attributed to a corporation if a member of
its senior management engaged in, consented to, or connived in
the offence. This could be drafted so that chief executive
officers and chief financial officers are always considered part
of an organisation’s senior management.
3. Introduce an offence of failure to prevent fraud by an
employee or agent. This would apply when the company has not put
appropriate measures in place to prevent their own employees or
agents committing a fraud offence for the benefit of the company.
4. Introduce an offence of failure to prevent human rights
abuses.
5. Introduce an offence of failure to prevent ill-treatment or
neglect.
6. Introduce an offence of failure to prevent computer misuse.
7. Make publicity orders available (requiring the corporate
offender to publish details of its conviction) in all cases where
a corporation is convicted of an offence.
8. Introduce a regime of administratively imposed monetary
penalties.
9. Introduce civil actions in the High Court, based on Serious
Crime Prevention Orders, with a power to impose
monetary penalties.
10. Introduce a reporting requirement requiring large
corporations to report on anti-fraud procedures.
Summary Report attached
