Some days ago, Circular 1/2016, on criminal liability of corporate bodies further to the reform of the Criminal Code, which you can access here, was published.
Much has been written on said reform, so I wish here to focus on the Circular by the State Attorney, particularly with regard to the «specific regulations for small corporate bodies«, which is the majority of companies in Spain.
Before examining the latter, a few words on the news item published today in «Expansión Jurídico«, as it has a great impact regarding corporate liability in this matter.
This article begins thus:
“In order to avoid possible criminal liability, corporations should require third parties, with which they deal, to implement prevention and compliance programs.
Criminal liability of companies, as the corporate bodies they are, affects not only offences committed within the organization, but also those committed by third parties such as suppliers, subcontractors or self-employed workers rendering services to the company.
Therefore, the Civil Code requires the supervision, surveillance and monitoring of all those subject to the authority of those responsible for the company, as would be the case when a service is commissioned to another firm. However, in order to consider the company responsible, the offence must provide some benefit, directly or indirectly, to said company.»
Example of corporate criminal liability
“A case in point would be that of a self employed sales representative who rendered his services to a company, should he bribe a public official in an attempt to land a contract (with or without the knowledge of the company) or that of a tax advisor contracted by a company and who commits an offence in the interest of the latter.
The circular in question insists on this issue; it warns that it needs only for the offender to be under the orders, supervision, surveillance or monitoring of the company, even if there is no «formal link by way of a commercial or work contract, including self employed or subcontracted workers».
The aim is for companies to be aware that they can be fully responsible for work commissioned to a third party and not to shirk liability.”
Corporate criminal liability of small companies
Circular 1/2016, on criminal liability of corporate bodies further to the reform of the Criminal Code provides, in its Art. 5.5:
“Paragraph 3 of Art. 31 bis contains a specific regulation for small corporate bodies, i.e. those authorized to submit abbreviated profit and loss accounts.
The only specificity allowed these small corporate bodies is a waiver of condition two of the previous paragraph, i.e. allowing the compliance officer’s functions to be carried out by the administration body. So they do have to adopt organization and management models as required in paragraph 5.
However, the characteristics of the organization and management models of such small corporate bodies must be adapted to their specific organization structures largely dictated by legislation, unlike those of companies with more complex structures.
Thus, the ethic commitment of these small organizations will be satisfactory if they reasonably adapt the formal requirements of paragraph 5 to their dimension, evidencing their culture of compliance, beyond the strict literal interpretation of the legal provision, consistent with the less strict requirements, from the accountancy, business and tax point of view, applicable to such specific types of corporations».
There is no doubt that the Circular issued by the Attorney General aims at the prevention and compliance programs being as rigorously applied as in any large corporation, albeit adapted to the particular dimensions of small corporations.
How to prevent corporate criminal liability
Ultimately, it is necessary, further to the entry into force of the reform of the Criminal Code, to implement certain measures to avoid criminal liability for companies.
It will be necessary to carry out a diagnostic risk analysis and implement an internal protocol for the implementation of measures.
Fornesa Abogados provides advice for the implementation of necessary measures in order to avoid such liability.
Should you be interested in receiving more information in this regard, please do not hesitate to contact me here.