Corporate criminal liability

What it means

Corporate criminal liability means that a company itself, not just particular individuals, can be convicted of certain crimes. It concerns mainly acts committed for its benefit, on its behalf or within its activities by its directors, persons with supervisory powers or employees.

The law lists the offences for which a company can be liable. They include fraud, tax evasion and failure to remit tax, bribery, money laundering, damage to the EU's financial interests and some environmental crimes.

A company's criminal liability does not lapse just because the individual who committed the act cannot be identified. Corporate and individual liability exist side by side, so a court may punish both the company and the director or employee who committed the offence.

How it works in practice

Penalties can be severe: a fine, forfeiture of property or items, a ban on activities, a ban on receiving subsidies and on taking part in public procurement, publication of the judgment and, in the most serious cases, dissolution of the legal entity. Many of these threaten the very existence of the business.

Protection comes from a working compliance system: clear rules, an anti-bribery policy, control of high-risk processes, training and a whistleblowing channel. Effective control mechanisms can play an important role when the company's liability is assessed.

In tax matters the risk is linked mainly to VAT fraud, such as involvement in carousel fraud, and to fictitious invoices. Vetting suppliers, checking that supplies are real and documenting business relationships help demonstrate the company's good faith.

What to watch out for

Liability also passes to a legal successor, for example in a merger or sale of a business. In acquisitions it is therefore important to check whether the target is involved in criminal proceedings or suspicious transactions that could later burden the buyer.

Businesses subject to AML rules, such as accountants and tax advisers, must report unusual transactions. Failing to do so can lead to sanctions and, in serious cases, to suspicion of involvement in money laundering.