The new law on the corporate criminal liability is being processed in Poland and very soon businesses may be held liable for criminal offences committed not only by its directors (i.e. by a company’s own actions) but also by its employees, representatives and contractors. The new law is likely to be passed in the first half of 2019. The proposed changes will have a serious impact on every company based in Poland.
First of all, under the new rules, bringing a company to account for criminal offences will not depend on the prior conviction of the alleged perpetrator (the individual who committed the offence) or even prior identification of the alleged perpetrator. This is a sea-change. It means that the prosecutor will be able to start proceedings against the company without waiting for the result of the proceedings against the perpetrator, provided that the company gained any profit from the action of the perpetrator. Under the current system, businesses may be prosecuted for criminal offences only if the perpetrator was found guilty as charged.
Secondly, under the new rules, businesses will be held liable not only for their own actions (i.e. the actions or non-actions of the members of the board) but also for the employees’ actions, the representatives’ actions and the actions of the company’s contractors. The main criterion will be whether a company gained any profit or benefit as a result of an unlawful action. The scope of liability will be very broad as businesses will be liable for all criminal offences listed in the Criminal Code and also for other offences specified in other pieces of legislation (tax crimes, environmental crimes, etc.).
Thirdly. the fines to be imposed will be horrendous. The courts will be able to impose a fine ranging from PLN 30,000 to even PLN 30 million. In special cases, where the company’s activity threatens the security of economic transactions, the court will also be able to order the dissolution of the company. The fines will not be an end of the problem; other sanctions can be imposed too, if the need arises (such as being disqualified from public contracts or interim ban on certain business operations).
How businesses can best avoid corporate criminal liability?
Under the new rules, the burden of proof will not be on the prosecution but on the company. The company will have to prove in the court of law that it applied utmost care and appropriate due diligence in choosing the contractors and in supervising the activity of employees and contractors.
What does it mean in practice?
It means that the company must adopt appropriate rules and regulations as well as an overall compliance programme. Each company will have to have the mechanism and procedures for the effective verification of the contractors, for instance the rules on outsourcing or the rules on hiring key employees. All these rules and regulations will be the most important piece of evidence in the court proceedings to prove that the company is not guilty of bad organization or poor management in hiring people which, in turn, led to the criminal offence. If the company is not able to prove utmost care in choosing and supervising employees and contractors, it will be found guilty as sentenced to pay a fine.
If the company is convicted for the criminal offence committed by its employees or contractors, then the members of the management board may be brought to account for gross mismanagement of the company’s affairs, i.e. for the lack of the compliance programme.
What should be done?
Each company should start preparations for the new rules as soon as possible. The first steps should be as follows:
- carrying out an internal audit to identify and assess potential risks and compliance issues taking into account the company’s areas of activity and possibility of criminal offences; in other words the company should make a list of potential unlawful actions which may be committed by its directors, employees or contractors (this catalogue will be different for a manufacturing company, a trading company or a service company),
- developing the rules of conduct, regulations and guidelines for the company’s directors and employees,
- appointing a compliance officer responsible for the adoption of developed compliance policies and actions to be undertaken in case of potential illegal situations.
If the company takes no steps to regulate this area and mitigate relevant risks, it will be extremely difficult to avoid criminal liability if the proceedings are started.