Criminal Liability of Companies. CAYMAN ISLANDS Walkers

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1 Criminal Liability of Companies CAYMAN ISLANDS Walkers CONTACT INFORMATION Diarmad M Murray Walkers PO Box 265 GT 87 Mary Street, Georgetown Grand Cayman KY Cayman Islands, British West Indies Tel: / Fax: Diarmad.Murray@walkersglobal.com 1. General 1.1. Can a company be prosecuted in your jurisdiction in a similar way as an individual offender? Please explain the main differences, if any. It is certainly possible for a company to be prosecuted in the Cayman Islands in a similar way as an individual offender. This is because a charge or indictment will lie against any person who commits an offence or assists in the commission of an offence. According to the Interpretation Law (1995 Revision) "person" (unless inconsistent or otherwise provided) in any law means any corporation, either aggregate or sole, and any club, society, association, or other body, of one or more persons. This is in line with most common law jurisdictions. A company is, for most purposes, a legal person just as much as an individual. Clearly a company cannot be assaulted or murdered as an individual can, but in relation to offences against property, "person" and "owner" include corporations of all kinds and any other association of persons capable of owning property: Penal Code (2006 Revision). 1

2 Inconsistency or contrary intention, however, will preclude criminal liability of a company. It is important to consider distinctly whether a company may be convicted of an offence from, if it can be so convicted, how it may be convicted. In short, a company's liability will depend on whether the offence is one for which there is vicarious liability, or, if there is not, whether the natural person who performed the actus reus with the requisite mens rea was part of the controlling mind of the company. The well-documented principles of the common law govern this area Can other types of sanctions under criminal law been imposed on companies? Describe the major types of sanctions and their legal prerequisites. Assuming that the offence is one for which a company can be held criminally liable, then the normal sanctions available under criminal law upon conviction can be imposed on companies, i.e. imprisonment and other restrictions on or deprivations of liberty, and financial penalties. For example, the director of a company convicted of manslaughter could be sentenced to a term of imprisonment Are there any other kinds of sanctions in other fields of law which can be impposed on companies following the commission of an offence by its directors, managers or employees (e.g. fines, dissolution of a company, etc.)? Please describe the relevant sanctions and summarize the legal prerequisites. There are a number of non-criminal sanctions available to the courts in the Cayman Islands which can be imposed on companies, their directors or officers, upon certain failures or omissions, as set out for example in the Companies Law (2007 Revision). These largely take the form of financial penalties but do include the winding-up of the company and the possible prosecution of its directors or officers. 2. Criminal Liability of Companies 2.1. What types of sanctions can be imposed on a company? What is the minimum/maximum punishment for each sanction? If the sanctions distinguish between certain types of offences please describe the sanctions for the most relevant offences or groups of offences. See 1.2 above. The minimum and maximum penalties for a criminal offence would be the same for a company as for a natural person convicted of the offence. Non-criminal sanctions can take the form of financial penalties which are incurred at a fixed amount on a daily basis during the lifetime of the particular infraction What are the legal requirements for each type of sanction? The legal requirements for the imposition of a criminal sanction would be the same for a company as for a natural person, i.e. a criminal conviction, that is to say one in which the particular tribunal has found the charges proven on the evidence to the extent that it is sure of the defendant's guilt. For certain non-criminal sanctions, e.g. where, on the 2

3 winding-up of a company, the court orders a delinquent director to repay misapplied monies, there would still be an examination of the conduct of that director by the court, before he were ordered to repay: section 169 Companies Law (2007 Revision) Is the prosecution of a company confined to certain types of offences or to offences committed by certain hierarchy of company staff? If yes, please explain in more detail. See 1.1 above. Certain statutory provisions and the principles of the common law mean that the prosecution of a company is, effectively, confined to certain offences. For example, a company may not be prosecuted for bigamy, as it is not a natural person and cannot commit the offence vicariously or otherwise. For conviction for other offences, a company may be held liable for the acts or intentions, etc. of any person who represents its "directing mind and will" How will acts (or omissions) of individuals (directors, managers, employees) be attributed to a company? Can acts or omissions been attributed if the individual violated only internal (but not statutory) rules or regulations? The acts or omissions of individuals are attributed to a company according to both the company's primary rules of attribution found normally in its constitution, and according to the normal rules of agency and of vicarious liability. The question will be a factual one in each individual case. It would be possible for the violation of internal company rules or regulations, but not statutory rules or regulations, to result in criminal liability of the company, so long as there is an actus reus and the requisite mens rea for the offence How will mens rea of the company be established? The mens rea of the company can be established by reference to the acts and state of mind of those directors, managers and officers who, on the particular facts of the case, represent the "directing mind and will" of the company Is there a strict liability of a company for certain kinds of offences for which mens rea is not required? Please describe for which kind of offences mens rea is necessary and for which not. Strict liability comes when there is no requirement of mens rea. There are some offences in the Cayman Islands which are offences of strict liability. Please see relevant legislation Is it necessary to identify and/or convict the individual offender in order to prosecute a company? It is not necessary to convict an individual offender in order to prosecute a company, though both may be prosecuted at the same time and for the same offence. It is usual, 3

4 therefore, for the individual to be at least identified. In addition, it is possible for corporate liability to arise where the actus reus is proven to have been committed by an employee of the corporation who is not part of the "directing mind or will" but where the mens rea is within the "directing mind or will" What additional defenses (except of lack of offence) can a company raise? There are no special defences in criminal law open to a company that would not be open to a natural person Can a company avoid punishment if it is sufficiently organized, has duly instructed its directors, managers or employees and has taken reasonable care to exert control on its directors, managers or employees? What extent or organizational requirements and control are necessary to avoid conviction? A company would avoid punishment if the usual common law rules of agency and vicarious liability were found not to apply Can certain kinds of sanctions been executed during the investigative phase of a criminal proceedings (e.g. preliminary seizure of bank accounts, attachment of claims)? A company would avoid punishment if the usual common law rules of agency and vicarious liability were found not to apply Can both the individual offender and the company been convicted for the same offence? See 2.7 above Can a parent/group company been prosecuted for offences being committed within a subsidiary? See the normal rules of the "directing mind or will" principle at common law. 3. Criminal Sanctions on a Company 3.1. What other types of sanctions but a criminal punishment can be imposed on a company? Please describe the types of sanctions and their legal requirements. See 1.2 above Is the imposition of these sanctions confined to certain types of offences? Describe the most relevant sanctions and types of offences? 3.3. What defenses can a company raise against these offences? 4

5 Outside of criminal offences and where there are non-criminal sanctions, they are available only in certain specific circumstances, e.g. where a delinquent director may be compelled to pay back misapplied funds upon the winding-up of the company. In cases such as this, there would be no "offence" as such Can such sanctions been executed during the investigative phase of a criminal proceedings? It is possible for, to use the example above, the delinquent director to be ordered to repay misapplied funds, notwithstanding the fact that he could be also criminally liable for his act or omission. As such, the sanctions could be executed during the investigative phase of criminal proceedings. 4. Procedural Issues in Cases of Corporate Liability 4.1. Does the prosecution have discretion to prosecute or not a company? Which aspects will the prosecution take into account? There is prosecutorial discretion in relation to all alleged criminal offences. The decision whether to prosecute is based on the satisfaction of two tests: (i) whether there is sufficient evidence, or a prima facie case, and (ii) whether it is in the public interest to proceed to prosecute At what stage during an investigation/proceeding does a company have the status as a suspect or similar status? The point at which a person 'has the status of a suspect or similar status' will depend on the form the particular investigation takes. For example, if a company's offices are searched but no-one is arrested for some months after, it would be argued that 'suspect' status came at the time of the search, rather than at the time of arrest Does a company have the rights to remain silent (nemo tenetur se ipsum accusare), to refuse production of documents, to deny access to company site without search warrant, to refuse testimony, to answer questions or to any other suspects rights? Who exerts these rights if investigations are made against the company s directors? A company does not stand in exactly the same position as a natural person, to the extent that it (or its directors, managers or officers) can be investigated for and charged with specifically corporate offences. As such, though the right to remain silent would remain for an individual director, etc. arrested and charged for a criminal offence - even a corporate criminal offence there are certain circumstances where an investigating authority has powers to enter offices, examine documents, etc, and where to refuse would be a criminal offence for either the company and/or its directors, etc. See, for example, the powers of the Cayman Islands Monetary Authority to have access to certain documents and information, pursuant to the Monetary Authority Law (2004 Revision), and under the Banks and Trust Companies Law (2007 Revision). 5

6 4.4. When will a company be informed that it is or can become prosecuted? The time at which a company is informed that it is to be prosecuted is a matter of discretion for the investigative authorities and will depend upon the specific facts of each case Can the directors, managers or employees be witness in proceedings against a company? Does this also apply if the directors, managers or employees are suspects themselves? The directors, managers or employees of a company are prima facie competent and compellable witnesses for the prosecution at the trial of a company. If they too were suspects in the same proceedings, the normal common law rules would apply to whether they gave evidence Will there be a joint proceeding against the company and the individual offender? See 2.7 above Does the proceeding against a company differ from that against an individual suspect? If yes, describe the elemental differences. No. See 2.7 above. 5. Procedural Issues on Other Criminal Sanctions 5.1. Does the prosecution have discretion to impose or not a sanction on a company? Which aspects will the prosecution or court take into consideration? The sentence or penalty to be imposed on a convicted company or director, etc. is a matter only for the court and not the prosecution Does the company, have the status of a suspect or a similar status and at what stage in proceedings? See 4.2 above When will the company been informed that the prosecution is considering to impose sanctions or have sanctions imposed? See 4.4 above. 6

7 5.4. Which procedural rights does a company have when it is at risk that sanctions might be imposed? See 4.3 above Will there be joint proceedings against the company and the individual offender? See 4.6 above Does the proceeding against a company differ from that against an individual suspect? If yes, describe the elemental differences. See 4.7 above. 6. Criminal Liability of Directors or Managers 6.1. Can directors or managers be criminally held liable for offences committed by other individual directors, managers or employees? Which legal concepts apply in your jurisdiction? Yes, if the directors or managers held criminally liable are found to be part of the "directing mind or will" of the company What are the legal requirements for a criminal liability of directors and managers for offences committed by others? The directors or managers would be liable for the acts committed by others if they themselves were part of the "directing mind or will" Does a criminal liability arise only from the fact that another director, manager or employee was not adequately selected, instructed, supervised or the company not adequately organized? No. These are just some examples of factors which may incur liability on the part of the director or manager. The facts of each case will be specific as to what lapse or omission, if any, gives rise to liability What recommendations do you have to exclude or minimize criminal liability risks of directors of a company? The criminal liability of directors of a company can be minimized by ensuring clear and effective chains of command and rigorously enforced safety standards. 7