Expanding Corporate Criminal Liability: Will Companies Be Liable for Senior Managers’ Actions?

Proposed Expansion of the Identification Doctrine

On 15 June 2023, the Government tabled a new amendment expanding the so-called “identification doctrine”.

The Law As It Stands

• Under the current law, save for certain exceptions such as failure to prevent bribery, companies in England can only be criminally liable where the individuals representing the company’s “controlling mind and will” have the necessary mental state required for a conviction. This principle has been applied narrowly by the Courts, and prosecutors have lost some high-profile cases on this basis, such as the Serious Fraud Office’s (“SFO”) dismissed attempts to prosecute Barclays in 2020.

Proposed Amendment

• The Government is now proposing new legislation that will make companies criminally liable if “senior managers” commit fraud, money laundering or other economic crimes.
• The amendment proposes that if a “senior manager of a body corporate or partnership (the ‘organisation’) acting within the actual or apparent scope of their authority commits a relevant offence after this section comes into force the organisation is also guilty of the offence. ” A “senior manager” is defined as “an individual who plays a significant role in (a) the making of decisions about how the whole or a substantial part of the activities of the body corporate or (as the case may be) partnership are to be managed or organised, or (b) the actual managing or organising of the whole or a substantial part of those activities.” (This definition is drawn from the Corporate Manslaughter and Corporate Homicide Act 2007.)

Purpose

• This amendment is intended to address the problem that complex management structures, in particular in larger companies, can conceal who key decision makers are. The government has also proposed guidance as to how this will work in practice: “[A] test will be applied to consider the decision-making power of the senior manager who has committed an economic crime, rather than just their job title.”
• The proposed change follows the Law Commission’s Corporate Criminal Liability Options Paper published last June, which included as an option expansion of the identification doctrine to allow conduct to be attributed to a corporation “if a member of senior management engaged in, consented to, or connived in the offence”.
• If the amendment is passed as is, we can expect a good deal of thought to be given – in government, corporate boardrooms, and ultimately the courts – as to the meaning of “significant role” in the context of a senior manager, the scope of decisions relating to a “substantial part” of an organisation’s activities, and when actual or apparent authority can be established.