The Law Commission is currently holding a consultation due to concerns that the current law does not always criminalise corporate misbehaviour appropriately, especially in the case of large corporations. While any legal changes are far off, it could eventually make it easier for corporations to be captured and punished for criminal offences.

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Corporate criminal liability

Under current laws in England and Wales, companies can be held accountable for crimes and penalised by the courts. However, such prosecutions are hard to achieve, largely because of the ‘identification principle’. This stipulates that a company can only be guilty of a criminal offence if someone representing the company’s ‘directing mind and will’ acts with criminal intent, recklessness or dishonesty. (Although there are some exceptions to this rule, including that of corporate manslaughter).

Concerns about corporate criminal liability

The Law Commission, which reviews the laws in England and Wales, is concerned that the identification principle may be allowing companies to resist prosecution. This is particularly true for larger organisations with complex decision-making structures, as it is harder to identify a ‘directing mind and will’. On the other hand, it is easier to hold smaller companies to account, as decision-making responsibilities may fall to very few people. Ultimately, this makes the law unfair.

Law Commission consultation

Due to these concerns, the Law Commission has opened a consultation to see whether and how the law on corporate criminal liability could be improved.

One option is to introduce a ‘failure to prevent offence for forms of economic crime. In fact, the failure to prevent bribery and the failure to prevent tax evasion has already been created. The Law Commission is examining whether further ‘failure to prevent’ offences could be implemented, such as the failure to prevent fraud. If so, a company can be guilty unless it can show that there were adequate procedures in place to prevent the conduct.

The Law Commission is also looking at whether the identification principle should be reformed, and whether it can learn from approaches taken in other countries.

What’s next?

There will not be any legal changes just yet. The Law Commission is still in the consultation stage and is holding a series of webinars with a panel of experts to discuss concerns and options with attendees. It will use the findings of this consultation to make recommendations to the government. So, while companies do not need to concern themselves with any legislative changes just yet, they should be aware that reform could be in the pipeline.

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