Criminal Liability of Companies. DENMARK Kromann Reumert

Transcription

1 Criminal Liability of Companies DENMARK Kromann Reumert CONTACT INFORMATION Morten Samuelsson Kromann Reumert Denmark Sundkrogsgade Copenhagen Denmark Tel: / Fax: mos@kromannreumert.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. A company may under Danish criminal law be punished by a fine, provided such punishment is provided for by law or by regulations issued pursuant to law (section 25 of the Danish Criminal Code (the "Criminal Code")). Thus a company is under Danish law only subject to criminal punishment provided the law (or regulation issued pursuant to law) in a certain area stipulates specifically that a company is subject to criminal punishment in case an offence is committed by the company. A company may thus be prosecuted in a similar way as an individual offender provided such legal basis is present. However, a company may only be subject to punishment by a fine - not by imprisonment. 1

2 1.2. Can other types of sanctions under criminal law been imposed on companies? Describe the major types of sanctions and their legal prerequisites. A company may be subject to confiscation (section 75 of the Criminal Code), if the company has gained proceeds from a criminal act. Confiscation is, however not an automatic sanction. Thus confiscation requires that the prosecution - in its discretion - opts to demand confiscation and that the court endorses the demand 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. Several Danish tax laws impose an obligation upon companies to file various information to the authorities within certain time limits. If these time limits are not adhered to the company may be subject to an administrative charge in form of a penalty fine. Penalty fines may also be executed for breaches of environmental protection laws. Furthermore a company may risk dissolution under certain circumstances. Thus the Danish Public Companies Act and the Danish Company Accounts Act impose an obligation upon the management and board to file the company's yearly accounts within certain time limits. If the time limits are not adhered the Danish Commerce and Companies Agency will request the Bankruptcy Court to dissolve the company. 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. As explained above a company may only be punished by a fine. The fine will be fixed as a lump sum for offences laid down in special criminal laws (as opposed to the Criminal Code, which is generally applicable) which offences are the more important for companies. The size of the fine is left to the discretion of the court. Thus there are no maximum limits and neither any minimum limits. The court shall, when fixing the size of the fine, give special consideration, within the limits relative to the nature of the offence and the gravity of the offence, to the offender's capacity to pay the fine and to the gained or expected gained proceeds or savings resulting from the crime What are the legal requirements for each type of sanction? Punishment by a fine is the general sanction applicable to companies and the levying of a fine requires only that the company is guilty of an offence which the law stipulates that a company may be punished for. Confiscation requires that the company has gained proceeds or made savings as a result of the offence. 2

3 2.3. 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. As explained above prosecution of a company (or in fact any legal entity) is subject to this possibility being specifically provided for in the law. Criminal liability for a company is on the other hand only subject to it being established that a (natural) person connected to the company or the company as such commits an offence (which the law provides is a criminal offence for the company). A person connected to a company comprises the management and all employees of the company; however it may in rare cases also cover independent contractors acting on behalf of the company 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? Acts or omissions will be attributed to the company provided they are done by directors or employees of the company in connection with the carrying out of assignments for the company (section 27 of the Criminal Code). Only in case of clearly abnormal behavior may the company argue that it is not liable for the acts of such an individual. Violation of internal rules does not (in itself) qualify as abnormal behavior for which the company is not liable How will mens rea of the company be established? If mens rea is required by the law (or regulation given pursuant to law) in order for an act or omission to qualify as a criminal offence for a company mens rea will need to be established on part of the natural person for which the company is liable, see above 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. The general rule under the Criminal Code is that mens rea is required in order to punish for a criminal offence. However for other criminal offences laid down in other acts (special criminal laws) the general rule is that a penal sanction shall apply even if the offence is committed only negligently. Moreover companies are subject to strict criminal liability for certain offences related to work environment and agriculture Is it necessary to identify and/or convict the individual offender in order to prosecute a company? It is not required that an individual offender is identified. Thus the company may be prosecuted, if the company as such is guilty of an offence, which it can be for a number of acts or omissions committed by individuals for whom the company is liable, irrespective of whether each single act or omission qualify as an offence in itself. 3

4 2.8. What additional defenses (except of lack of offence) can a company raise? The general defenses available to natural persons are also available to companies. Thus a company may avoid punishment, provided it i.e. proves necessity or consent from the victim 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 may under Danish law be held criminal liable in spite due care has been exercised in the instructions of directors, managers and employees. Thus a company may only avoid conviction in case of clearly abnormal behavior from an individual for which the company is liable, see also above 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)? The police may seize objects, including monies, already during the investigative phase of criminal proceedings if the object is of importance as evidence, if it is subject to confiscation or in order to obtain security for payment of fines or costs, or in order to secure stolen goods or effects to be given back to the victim, or in case the offender charged has avoided prosecution (section 801 of the Danish Administration of Justice Act) Can both the individual offender and the company been convicted for the same offence? The prosecution has the right to prosecute not only the company, but also the individuals guilty of the acts or omissions for which the company is being held liable. However the prosecution applies in general "the principle of choice" for the purpose of not prosecuting employees only guilty of minor efforts Can a parent/group company been prosecuted for offences being committed within a subsidiary? The general rule is that only the subsidiary can be prosecuted for offences committed within the subsidiary. However, a parent company may dependent on the circumstances and the type of offence be prosecuted for lack of control or insufficient instructions. It has also been suggested in legal writing that the general rule may be departed from, if the basis for the offence committed within a subsidiary is in fact decisions taken by the parent company. 4

5 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. As explained above a company may be subject to confiscation, if the company has gained proceeds from a criminal act. It is also mentioned that an administrative charge in form of a penalty fine may be levied upon companies for breach of duties under various Danish tax and environmental protection laws. Further a company may risk dissolution under certain circumstances. A company may, however also be faced with a claim for damages by the victim, subject to the victim establishes that the company has caused a loss for the victim as a result of the offence. The prosecution is obliged to pursue such claims for damages in connection with the criminal proceedings upon request from the victim; however the courts may in its discretion decide that the claim for damages shall be pursued in separate civil proceedings, if it is not convenient to hear the claim for damages together with the criminal proceedings Is the imposition of these sanctions confined to certain types of offences? Describe the most relevant sanctions and types of offences? Reference is made to what is said above under What defenses can a company raise against these offences? Penalty fines may in general only be avoided in rare cases. Whether a defense is available will depend upon the wording of the specific provision forming the legal basis for imposing the penalty fine, however in general a penalty fine for breach of a time limit stipulated in law may only be avoided provided the offender can establish that the breach was due to circumstances beyond the control of the offender which could not have been foreseen (force majeure) Can such sanctions been executed during the investigative phase of a criminal proceedings? Levying administrative charges in form of a penalty fine and dissolution of a company are not considered criminal punishment and may as such also 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? The prosecution is under no obligation to prosecute a company. Thus it is left at the prosecution's discretion whether a company shall be prosecuted for an offence. When considering whether to prosecute or not the prosecution will only decide to prosecute if 5

6 it considers that a conviction is more probable than an acquittal. Obviously the evidence available will in this regard be of major importance. The prosecution may also in rare cases decide to withdraw a charge in spite the necessary evidence is in principle available. Such withdrawal may be affected in case the efforts and costs required to prosecute does not adequately correspond the importance of the case and the punishment which it can be expected that the court will order (section 721 of the Administration of Justice Act) At what stage during an investigation/proceeding does a company have the status as a suspect or similar status? A company is regarded as "accused" (and not only a suspect), if the police or prosecution expressly designates the company as being accused. However, a company is also to be regarded as accused when means of compulsion have been imposed upon the company, which could be before the company expressly has been designated as accused. Means of compulsion includes invasion of communication, search and seizure 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? The Administration of Justice Act does not expressly provide a company with the right to remain silent etc. However it has been taken as a well established rule in Danish criminal procedure that a company has the right to remain silent etc. Thus the general rule is that the individual representing the company in criminal proceedings is entitled to remain silent etc. Section 10 of Act no 442 of 9 June 2004, which applies outside criminal proceedings, stipulates that obligations to disclose information to an authority laid down in law do not apply in case there are specific grounds for suspecting a natural or legal person of being guilty of an offence subject to criminal punishment, unless it is established that the information sought by the authorities have no bearing on the prosecution of the alleged offence. Thus it is specifically laid down in Danish law that a company has the right to remain silent towards a request for disclosure put forward by the authorities (outside criminal proceedings), even if such request has legal basis, provided there is specific grounds for suspecting the company of being guilty of a criminal offence subject to punishment When will a company be informed that it is or can become prosecuted? It will depend upon the circumstances when a company is informed that it is or can become prosecuted, however a company cannot expect to be informed of the matter before it is formally charged. A charge will follow investigations carried out by the police and thus it may be that the company during such investigations will realize that it may be prosecuted. 6

7 4.5. 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 Danish criminal law commission has stated that it is only the company's legal representative in criminal proceedings that are to be treated as accused with the benefits this implies (the right to remain silent etc.). The legal representative will in most cases be the company's managing director. It follows that board members and employees are to be considered witnesses subject to the witness rules in the Administration of Justice Act. These rules include the protection against selfincrimination. Thus employees or board members have the right to remain silent should they expose themselves to criminal liability if they testify. It follows that employees or board members cannot be compelled to testify if they are suspects or even accused themselves Will there be a joint proceeding against the company and the individual offender? The general rule is that there will be a joint proceeding against the company and the individual offender; however the circumstances may require that separate proceedings be conducted Does the proceeding against a company differ from that against an individual suspect? If yes, describe the elemental differences. There are no material differences between criminal proceedings against a company and against an individual. 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 prosecution has no rights to impose sanctions upon a company. Thus sanctions will be imposed by the court in its discretion having due regard to the limits for punishment of the type of offence in question stipulated by the law. The prosecution is, however entitled to invite the accused to pay a compound fine in case the penalty stipulated in law for the offence is a fine. Thus the criminal charge may be settled by the accused company paying a compound fine without the involvement of the court. The only requirement is that the company does not expressly plead innocent. Thus it is accepted that the compound fine is paid without any express statement as to guilt Does the company, have the status of a suspect or a similar status and at what stage in proceedings? N/A 7

8 5.3. When will the company been informed that the prosecution is considering to impose sanctions or have sanctions imposed? N/A, see above Which procedural rights does a company have when it is at risk that sanctions might be imposed? N/A 5.5. Will there be joint proceedings against the company and the individual offender? N/A 5.6. Does the proceeding against a company differ from that against an individual suspect? If yes, describe the elemental differences. N/A 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? Under Danish law each director or manager will be judged individually. Thus there is in principle no possibility of being liable for other directors', managers' or employees' offences. Having said that it should be had in mind that the general rule of complicity (Section 23 of the Criminal Code) does also apply to directors. Thus in case an employee is guilty of a criminal offence a director may be held liable for negligent complicity if he is guilty of not having issued orders and guidelines pertinent to the behavior of the employee, if the law imposes an obligation on a director to issue such orders and guidelines What are the legal requirements for a criminal liability of directors and managers for offences committed by others? As explained above director and managers may be held liable for negligent complicity to criminal acts and omissions done by employees if they do not live up to their responsibility to issue orders and guidelines and to supervise, provided the law imposes obligations on the directors to this effect. 8

9 6.3. 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? Section 54 of the Danish Public Companies Act stipulates that the board of directors shall ensure proper organization of the business of the company, that the management board shall be in charge of the day-to-day business of the company and that the management in that capacity shall follow the directions and guidelines provided by the board of directors. The provision does also lay upon the board an explicit obligation to consider from time to time whether the financial position of the company is sound in the context of the company s operations. Moreover the board of directors shall pursuant to the same section ensure that the book-keeping and asset management is controlled in a satisfactory manner in consideration of the position of the company and that the book-keeping of the company is conducted in compliance with the relevant rules of law and that the asset management is carried out in a proper manner. Negligent breach of the duties laid upon the board of directors and the management board pursuant to section 54 of the Danish Public Companies Act is a criminal offence which shall be punished by a fine. However there are in case law only a few examples in which board members have been prosecuted for breach of section 54. As appears criminal liability may under Danish law be imposed upon directors or managers for breach of the obligation to ensure that the company is adequately organized as provided for in section 54 of the Danish Public Companies Act What recommendations do you have to exclude or minimize criminal liability risks of directors of a company? As explained above breach of the obligations imposed upon the board and the management pursuant to section 54 of Danish Public Companies Act may result in criminal liability for the board or management members. Consequently, it is of the utmost importance for the board to ensure that the duties are met. An important tool in this regard is rules of procedure. Thus the board should always adopt specific rules of procedure in which is laid down, how the board ensures that the obligations imposed upon the board are complied with. 9