Corporate Criminal Liabilities (CCL)

Corporate Criminal Liabilities ( CCL)

1. Criminal liabilities of company
2. Criminal liabilities of Directors

• Criminal liability of company is corporate criminal liability, criminal liability of directors also.

• The concept of corporate criminal liability is an established concept of developed corporate world.

• A company may be liable for criminal offences where an offence is committed by its directing mind. In such cases it is the duty of state to prove that illegal acts were committed and mens rea must be shown to exist. Mens rea can be in form of intention to criminal act or knowledge that the act was unlawful.

• It is very difficult to accuse a company of possessing guilty mind, because it has no personal mind or conscience. But sometimes it is expedient to make companies liable to penalties for wrongful acts by attributing to as company, the wrongful acts and thoughts of human beings who are identified with company.

• Certain offences cannot be committed by a company such as bigamy. Where imprisonment is necessary a company is a non-human entity cannot commit murder.

• a company cannot be testified in person in court for such crimes. That is why, companies should not be held able to commit a wide range of criminal offences. Usually white color crimes fall under corporate crime.

• The intention of company can be derived from the intention of its officers and agents.

• The basis of imposing liability to company is its independent legal personality. Living persons have mind with knowledge or intention. They have their hands to carry out their intentions. The mind of natural person which directs his acts on behalf of company is the mind of company.

• In criminal law, perpetrator of the crimes must be a natural person .But in some condition or moral statute, the legal person are also considered to having the capability of committing crimes,.

• The term corporate crime ,white color crime , organizational crime, occupational crime and insider trading or dealing are often used interchangeable. Although close in meaning, those experiences do not suggest the same thing. But it has been taken as same thing in practice.

• Occupational crime implies completely different category of crimes.

• Occupational crimes, generally, do not refer to crimes committed by corporate entity, instead they refer to those crime committed by corporate employee not in favor of corporation.

Therefore, corporate crimes are in form of fraud, forgery tax evasion, bank and financial fault and default, misuse of foreign exchange, misrepresentation, fund embezzlement, cheating in government contracts, antitrust in purchasing and sales, activities against health and environmental safety, illegal international transaction insider dealing or trading and other statutory offences which are taken place to create potential criminal exposure for a corporation as well as for those who are involved to perform it.

• A corporate misbehavior is considered as corporate crime.
• CCL is known as an enterprises liability.
• Directors and employees are also a legal person distinct from the company; legal liabilities are in a sense of vicarious liability.

The traditional view was that a corporation could not be guilty of crime, because criminal guilty required intention and a corporation no body that could be imprisoned. The courts refused to corporate criminal liability but modern view is that when the criminal act requested, authorized or performed by the board of directors ,an officer or another directors, an officer or another person having responsibility person having responsibility for formulating policy or high level administrator having supervisory responsibility over the subject matter of the offence acting within the offences acting within the scope of his employment.

Challenges of CCL

1. Failure to identify or prove corporate intent or malice.
2. Procedural difficulties to prosecute against a company (accused should be personally present at trial but corporation/ companies cannot present in a criminal trail)
3. Corporation has no soul and no body.

Theory of CCL

The endorsement of CCL is the development of 20th century – Judicial development, influenced by the “sweeping expansion” of common law principles. The majority of theories of CCL are typical of common law development .They have been constructed on a case- by –case basis.

Principally, a company has ‘’no soul to be dammed and no body to be kicked” but practically, corporation are liable on following basis;

• Vicarious liability
• Personal liability for breach of statutory duty
• Personal liability on the basis of attributing to company the conduct and state of mind of an individual.

Other doctrines or theories have been emerged to held corporations criminally liable. Which are as detailed below.

Agency theory
The agency theory is based on the premises of 2 elements of crime Actus reus and Mens rea. Corporations are purely incorporeal legal entities, they do not possess any mental and only way to connect intent to a corporation is to consider the state of mind of employees. Though companies do not have intention someone within company must have it and the intention of this individual is supposed as the part of the company’s intention, due to the agency relation between company and employees such intention leads to the criminal activities. But the employees must be acting within the scope of employment, the employees must be acting for the benefit of corporation, the act and intent must be imputed to the corporations for making liable the company for the acts of its employees.

1. Vicarious theory/Liability
This is most important thought of CCL

Normally a person is not liable in criminal law for the acts of another. Vicarious liability is an exception of this rule and it is regarded as the constructive liability. Vicarious theory has utilitarian value in extending liability to wrongs committed by lower level officials and employees. However the reasonableness of imposing liability on a corporation has derived on benefit from such acts.

Vicarious liability by ratification, by blood relationship, by special relationship –master and servant , principal and agent, employee and employer.

2. Identification Theory
Under this theory , a company is reasonable for a criminal act of the persons who are directing mind or will of company. The persons who direct and control the company, have committed an offence in course of company’s business such person is treated in law as being the company, company takes responsibilities for those with decision- making authority over matters of corporate policies rather than implementing policy.

The breach of statutory duty by company
This is the doctrine which makes company criminally liable. This occurs where the statutes or regulations make corporation liable The companies Act(Consumer Acts)

Alternative methods for the establishment of CCL
The identification theory is found to be inadequate to deal with the reality of decision making in many modern and big company. That is why some significant principles have been introduced in corporate criminal jurisdictions which are;

• Aggregation doctrine
• Reactive corporate fault theory
• Corporate Menes Rea doctrine

CCL in Nepalese Law

• Constitutional provision
  • Right to freedom article 12 (3)(f) proviso part
  • Right to environment and health-Article 16(1)
  • Right to property Article- 19(2) proviso
  • Others -The Companies Act 2063 Specially Section; 159(1) (2),160(a-Z1),161(a-k),162,163 of Nepalese Company Act etc.

The Securities Act 2063BS;
– Sections 91,94,95,96,97,98,99,100,101,102,103 etc.

The Muluki Ain (Country Code)
– Chapter of cheating and chapter of Baki Natirneko etc.

Draft of Criminal Code 2067 BS
– Sec 30 “criminal liability for offense committed by a body corporate to be of the doer of the act or who causes to act to be done’’.

CIAA Act 2059,Corruption Prevention Act 2059

Nepal Food Act 2023
– Inferior quality product, adulterated food produce import, sale etc. Sections 5(1), 5(2), 5(3) and 5(4) etc.

The Foreign Exchange Regulation Act 2019
– Punishment for directing mind of body corporate

The Bank and Financial Institution Act 2063
– Sections 70, 71,48,74,35 etc.

Consumer Protection Act 2054

• Sections 7,9,10,18 etc.

• Inferior quality

• Adulterated food

• Harmful to health

• Any service, production

The Nepal Rastra Bank Act 2058
Sections 95,96,99,100 and 101etc.

The Property Tax Act 2047
Sec 7,24(1),26 etc.

The Revenue Leakage Investigation and control Act 2052
– Evasion &Avoidance of tax

The Foreign Employment Act 2064

The Money laundering Prevention Act 2064

• Chapter -2

The Income Tax Act 2058

• Section 120,123,127,&128etc.

The Securities Act 2063
– Section 5(f), section 74 Section 101/ chapter 8& 9

Related Cases regarding CCL

• Tesco Supermarkets ltd V. Nattrass 1972AC,153 H.L (Find and read)
• Bhopal Gas Leak Disaster case (Find and read)
• C Metha V. Union of Indian and Shree Ram Food and Fertilizer Industries AIR 1987 (Find and read)
• In Nepalese judiciary practice there is no any significant observation which is directly related with CCL.
• But some observations of Supreme court of Nepal such as Surya Sharma Dhungel v. Godabari Marble Industries,Thaneshower Acharyaet.et.al V. Bhrikuti Paper Industries are somehow related with the liability of maintaining non polluted environment and environmental safety by enterprises.