The general rule for attributing liability to companies in English and Welsh criminal law is the ‘identification principle’. This states that where a particular mental state is required, only the acts of a senior person representing the company’s “controlling mind and will” can be attributed to the company. In practice, this is limited to a small number of directors and senior managers.
In recent years, concern has been expressed that the identification principle does not adequately deal with misconduct carried out by and on behalf of companies (and other ‘non-natural persons’). In particular, some have suggested that it has proved disproportionately difficult to prosecute large companies such as banks for economic crimes committed in their names, by senior managers, for the company’s benefit. In practice, it can be much easier to hold a small company to account for wrongdoing than a large business where responsibility for decision-making is more diffuse.
A Law Commission options paper, published on 10 June 2022, provides a series of options for law reform, and sets out certain principles that they think the law ought to reflect.
- It concludes that there is a need for one or more general rules of attribution to cover offences generally.
- For offences of negligence, it should be possible to convict a corporation on the basis of collective negligence even if it is not possible to identify a natural person who was individually negligent.
- The Commission lays out various principles for “failure to prevent” offences, including a requirement that the conduct should be intended to benefit the corporation or a client, and that the corporation should have a defence if it had reasonable prevention procedures in place, or it was reasonable not to have any.
- Where an offence requires proof of intention, knowledge or dishonesty, directors’ personal liability for commission of the offence by the corporation should require proof that the director consented to or connived in the offence. Neglect as a basis of directors’ liability should be limited to offences of strict liability or negligence.
- Retention of the identification doctrine as at present.
- Allowing conduct to be attributed to a corporation if a member of its senior management engaged in, consented to, or connived in the offence.
- As above, with the addition that the organisation’s chief executive officer and chief financial officer would always be considered to be members of its senior management.
- An offence of failure to prevent fraud by an associated person.
- An offence of failure to prevent human rights abuses.
- An offence of failure to prevent illtreatment or neglect.
- An offence of failure to prevent computer misuse.
- Making publicity orders available in all cases where a non-natural person is convicted of an offence.
- A regime of administratively imposed monetary penalties.
- Civil actions in the High Court, based on Serious Crime Prevention Orders, with a power to impose monetary penalties.
- A reporting requirement based on section 414CB of the Companies Act 2006, requiring public interest entities to report on anti-fraud procedures.
A reporting requirement based on section 54 of the Modern Slavery Act 2015, requiring large corporations to report on their anti-fraud procedures.
It will now be for the government to respond and plan any next steps.
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We ensure we keep up to date with any changes in legislation and case law so that we are always best placed to advise you properly. If you would like to discuss any aspect of your case, please contact our team of criminal defence specialists on: 01376 511819