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    When can a corporation be held criminally responsible?

    Dec 10, 2019 1:11:13 PM

    On 15 November 2019 the Australian Law Reform Commission released a Discussion Paper into Corporate Criminal Responsibility.

    What is Corporate Criminal Responsibility?

    Under certain laws in Australia a corporation can be convicted of criminal offences. This may sound odd when considering that although a corporation is a separate legal entity, and so is able to be prosecuted, fundamentally a company cannot be put in prison. However, corporations have a great responsibility to society at large, as the damage of their misbehaviour has significant consequences.

    When corporations face criminal sanctions as well as civil penalties, it expresses a social repugnance at the behaviour and the publicity of the morally reprehensible conduct has serious ramifications for the corporation itself.

    When can a corporation be held criminally responsible?

    A corporation can be held criminally responsible in relation to almost every criminal act, excluding acts that are the sole domain of natural persons such as bigamy. For example, a corporation can be convicted of fraud be also be convicted of manslaughter, as in the case of R v P & O European Ferries (Dover) Ltd (1991).

    To be held responsible there are several bases that can be satisfied:

    1. A corporation may be held vicariously liable for a criminal act;
    2. A corporation may be held liable for criminal acts performed by individuals or groups who are the directing mind and will of the company; and
    3. A corporation may be held liable because they breach statute, or they fail to meet a certain standard of conduct which creates a strict or absolute criminal liability.

    What’s the problem?

    The Australian Law Reform Commission found at a base line that the “law as it applies to corporations is impenetrably complex and in need of significant reform. There is an overregulation by the criminal law of low-level contraventions and a failure to effectively use the criminal law for serious contraventions.”

    An example of this issue is that while criminal law should reflect society’s abhorrence at certain actions such as murder, criminal corporate responsibility does not always align. For example, “It is a criminal offence for a corporation to fail to notify ASIC of a change in office hours” which clearly is not a socially accepted morally reprehensible act.

    As a result, there has been an over-proliferation of using the criminal system in the corporate space which has reduced the effectiveness of these provisions.

    The Solution?

    The Australian Law Reform Commission has made 23 proposals for reform and is accepting submissions on these.

    In short, the proposal relates to the simplification and clarification of the system as it currently stands to ensure the effectiveness of criminal law in the corporate sphere.

    Take Home

    Be aware that corporations may also be found guilty for criminal acts as well as individuals, and the punishment for these are severe.

    If you have further questions, please contact Andrea Harrold at aharrold@franklaw.com.au.

    This is not legal advice. 

    Andrea Harrold

    Written by Andrea Harrold