Corporate Crime And The Regulatory Approach

• Published date: 10 August 2021
• Subject Matter: Corporate/Commercial Law, Criminal Law, Corporate and Company Law, Corporate Crime, Shareholders
• Law Firm: BCL Solicitors LLP
• Author: Mr Tom McNeill

Corporate criminal liability has been transformed beyond all recognition from what it was just 15 years ago.

Not merely have fines increased very significantly, the expectations placed on corporates have changed fundamentally. Companies are now expected to behave responsibly.

That doesn't just mean doing no wrong, it means preventing others from doing wrong.

And if they do not, they risk not merely reputational harm but criminal prosecution and highly punitive fines.

Background

A key change has been the growth and development of the 'regulatory' approach.

Traditionally, the most serious offences were 'mens rea' offences. These offences require proof of the relevant mental state as well as the relevant act - for example, theft requires proof of dishonesty and not merely the appropriation of property belonging to someone else.

Regulatory offences, previously seen as less serious, are to the effect that if the prescribed thing happens, or the required thing does not, an offence is committed, and it doesn't matter whether on organisation meant it or even knew about it.

Sometimes regulatory offences have a due diligence provision - so that it wouldn't be an offence if the person did all they reasonably could, but the prescribed thing still happened.

But it is the nature of regulatory offences, even those with a due diligence defence, that they're easy to commit and difficult to defend.

Identification doctrine

It's hard for companies to commit mens rea offences because it typically requires a directing mind, usually a director, to commit the offence which is then attributed to the company.

Often directing minds aren't involved with the relevant conduct - sometimes not provably so.

Legal scholars and practitioners used to query the justification for fining corporations, effectively the shareholders, for conduct they might not have approved or been aware of i.e. of which they were innocent.

It was also doubted that the shareholders would be moved (or be in a position) to take steps to address the offending. In any event, it was thought curious reasoning that an innocent person should be punished in order to compel him to do something which the law could do directly.

In more recent years the concern became that identification doctrine was shielding companies from criminal liability. The response has been the extension of the regulatory approach to mens rea offences.

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