Corporate & Director Liability

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Ross Dixon

Partner

Corporate liability is the concept that an organisation can commit – and be held liable for – certain categories of criminal offence. In such cases, the corporate body is considered as a distinct legal entity, separate to those working in the corporation, which may be prosecuted either with, or without, individuals purported to act in its name.

While there are specific criminal offences of corporate manslaughter and failure to prevent bribery, corporations can find themselves prosecuted for a range of different financial and general criminal offences.

But it not just a corporate body which is at risk in these prosecutions. Any individual working as a company director, company manager or corporate officer may also be exposed to criminal liability if they are deemed to be the ‘directing mind’ of the organisation in question. Liability can also attach to individuals outside the company given full discretion to act independently by a director in order to carry out their work.

Corporate Manslaughter

Created by Section 1 of the Corporate Manslaughter and Corporate Homicide Act 2007, the offence of corporate manslaughter was designed to ensure companies and other organisations can be held accountable for serious failings which result in death.

The offence applies to all companies and corporate bodies operating in the UK, whether they are incorporated in the UK or overseas. Public bodies such as NHS Trusts, local authorities, police forces and certain government departments can also be held liable.

Individuals cannot commit this offence. However, if there are suspicions that identifiable directors or managers committed gross failings then these individuals may be investigated for the offence of gross negligence manslaughter.

Bribery

The offence of failing to prevent bribery (section 7 BA 2010) can be proven against a company itself where an associated person (including an employee, contractor or agent) has committed bribery. A director does not need to be involved in or aware of the wrongdoing. The offence is punishable with a fine.

In recent years the SFO has made increased use of Deferred Prosecution Agreements as a way enforcing failure to prevent bribery offences without needing to bring a criminal prosecution.

In addition to the crime of failing to prevent bribery, companies can also prosecuted for offering a bribe; receiving a bribe or bribing a foreign public official (section 1, 2 and 6 BA 2010); and offences under the Fraud Act 2006 and for false accounting under section 17 of the Theft Act 1968.

Individual directors can be liable for all of the above offences if they allowed the offences to take place and failed to take steps to stop them taking place.

Triple threat to directors

One of the side effects of corporate liability is that directors can, in addition to being held responsible for significant financial penalties against the company, face the threat of personal criminal prosecution .

Unfortunately for directors, the law in this regard is strict and can sometimes fail to recognise how an organisation is really run. It may fail to take into account the fact that overarching managerial job titles can mask the reality of a business in which key decisions are taken at a much lower level, or in a side silo.

In addition to this threat, directors can find themselves at risk of disqualification as a director, usually on application by The Insolvency Service, and of professional sanction if they are members of a regulated profession such as an accountant, auditor or solicitor.

Experience

Hickman & Rose combination of corporate crime, serious crime and regulatory law experience gives us the expertise to tackle the most complex corporate and director liability matters.

Among recent clients is Chris Bush, former managing director of Tesco, who was acquitted at trial after having been accused of false accounting in a £250 million profit over statement. We have also represented a senior individual within Rolls-Royce accused of Bribery in Asia, an investigation which culminated in the company agreeing a Deferred Prosecution Agreement with the Serious Fraud Office.

Hickman & Rose lawyers understand the extreme personal and professional toll an impending criminal investigation can pose. We have the expertise to make the key legal and strategic decisions needed to win.