Spanish Criminal Code was amended by the end of last year 2010. One of the main changes is the new section 31bis, which establishes for the first time the criminal liability of legal entities, except for the governmental public companies, political parties and trade unions.
Company’s criminal liability will result when the directors or legal representatives commit a crime in its name or on its behalf and in the benefit of the company, or when the crime is committed by any manager or employee in the benefit of the company and without the due control on them. Consequently, the benefit and the lack of control or supervision by the superiors towards the employees will be the aspects which will make the company liable.
Culpability is understood as a defect of organization, without need of a direct malice, but only because of eventual or relevant imprudent acting. It is not necessary that the company is conscious of infringing the legal rule, but only that it cannot argue as defense that it ignored it.
However, article 31.bis.4 of the Criminal Code establishes some extenuating or mitigating circumstances in favor of the company: a) to confess the infringement to the authorities, before knowing that the judicial proceedings have been started against it; b) to cooperate in the investigation of the facts by providing evidences; c) to repair or reduce the caused damages at any moment of the proceedings and before the hearing; d) to establish, before the hearing, measures to prevent and discover crimes that could be committed in the company in the future.
Whether the company did not have any internal rules or compliance program until the commission of the crime and it enforces any later on, this could be accepted as a extenuating or mitigating circumstances. But if it proves that it was implementing such internal rules or compliance programs before the commission of the crime, it could be released from its criminal liability.
Article 130.2 of the Criminal Code establishes as well that the transformation, merger, absorption or split of the company do not extinguish the criminal liability of the company. Consequently, “due diligences” in mergers and acquisitions should also include criminal aspects, having to internally review the companies in order to discover, evaluate or determine the risk of criminal liabilities. Apparent dissolution of the company does not extinguish either its criminal liability, understanding that its dissolution is only apparent when activity is continued under another structure with substantial identity of clients, suppliers and employees.
Article 33.7 of the Criminal Code establishes the following penalties: a) fine; b) dissolution of the company; c) suspension of the activity for a period not exceeding five years; d) closure of premises for a period not exceeding five years; e) prohibition of activities in the future; f) disqualification for subsidies, for contracting with the public sector and to have tax or social security benefits or incentives; f) judicial intervention.
From now on, companies will have to follow a pro-active conduct to prove that the observance of legality is part of its corporate culture and to prevent any contingency that could also affect its image if it would become publicly known that it is under criminal investigation. Thus, they should implement compliance programs which allow: a) establishing and effectively communicating a conduct code; b) supervise its observance with effective control systems; c) establishing penalties in case of infringement; d) taking the due measures when any breach is detected.