The Ministry of Justice is preparing a draft amendment to the Act on Liability of Collective Entities. Large companies with more than 250 employees will pay even up to PLN 50 mn for offences committed by their employees or associates.
The Ministry of Justice is working on another draft amendment to the Act on Liability of Collective Entities. It is to be presented within the next few days.
The original assumptions of the draft were announced in 2017, but they met with criticism of entrepreneurs and, consequently, works on the draft were stopped. This is because the proposed regulations made the entrepreneur liable for a prohibited act committed in relation to their business, consisting in an intentional action or negligence of an employee, as well as a prohibited act resulting from failure to take required care in particular circumstances. Moreover, entrepreneurs were to be held liable also, among others, for failure to implement solutions aimed at counteracting essential threats leading to commission of a prohibited act, including the lack of procedures specifying the rules of conduct when finding irregularities and failure to appoint a person in the organisation who would watch over observance of law.
The most important change as compared to the original draft consists in making the act concern only large companies, i.e. employing over 250 individuals – thus, as it is assumed, the ones which have their own compliance departments and are potentially able to bear additional costs of controlling actions of the employed.
This is because according to the draft amendment to the act the court will be able to impose sanctions only after it has concluded that the prohibited act committed by an employee or associate is related to an action or omission of a company’s body or manager (or the owner). If criminal proceedings are initiated against the company, it should be able to prove that it implemented effective measures aimed at preventing commission of offences. What is more, it is the company that is obliged to ensure that explanatory proceedings are conducted in a situation where occurrence of a prohibited act has been reported, as well as remove irregularities or violations related to such an act.
Lack of proper mechanisms and related procedures will prevent companies from effective defence against high financial sanctions and other penal measures. Thus, liability of a large business will not be strict – if the company has developed and implemented internal control procedures, but the scope of liability will be significantly broader than it has been so far.
In order to avoid criminal liability, the entrepreneur will have to prove that they took actions aimed at preventing and avoiding irregularities, especially potential criminal actions of their employees. The author of the draft directly recommends that large companies have compliance departments, specified scope of liability of particular bodies of the collective entity and established rules of supervision over employees. Their lack may prove existence of irregularities in the entrepreneur’s conduct which, in turn, may result in imposition of a fine of between PLN 50,000 and PLN 50,000,000. This sanction will be independent of liability for damages towards the person who suffered damage of the injured entity.
Large companies, according to provided information, will be held liable not only for actions and omissions of their employees, but also associates and representatives, including those resulting from abuse of rights by such individuals (which has been excluded so far).
Proceedings with regard to liability of a collective entity for a prohibited act will be conducted by a public prosecutor, if there is reasonable suspicion of commission of a prohibited act constituting grounds for such liability and it is in the social interest. Evaluation of the social interest will take into account the following: degree of harmfulness of the prohibited act, amount of benefits gained by the collective entity, type of violated rules of caution and degree of their violation within the organisation, as well as the need to resolve the case within a reasonable time limit. The case will be examined by the court competent for prosecuting the perpetrator of the offence (this will be basically the court having jurisdiction over the place of commission of the offence).
What is more, according to the planned solution, the public prosecutor will have the right to oust the person managing the company already at the stage of the proceedings by imposing security in the form of the so-called compulsory administration. Thus, the public prosecutor, after court’s approval, will be able to delegate company management to a restructuring adviser previously not related to the company. In practice, this may lead to bankruptcy of even the most prosperous company or bring about significant losses.
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The proposed assumptions of the draft amendment to the Act on Collective Liability once again raise many concerns of entrepreneurs and controversies. There is no doubt that in the light of the legal system and basic rules of law they should receive negative evaluation.
What is more, there are serious doubts if the main aim of the amendment to the act, being crime prevention, will be achieved – even with the current regulations in force it is essential for entrepreneurs that offences related to their business not be committed. In particular, this concerns large companies, listed on the public market (especially stock exchange or NewConnect) whose actions are evaluated by stockholders.
Therefore, it seems that the market itself is able to effectively demand from entrepreneurs an appropriate level of supervision over the conducted business and one does not have to resort to criminal law for this purpose. It also seems obvious that in a democratic state under the rule of law it is the perpetrator of a criminal offence who should be effectively held accountable rather than the entrepreneur employing them. This is because the employer may also potentially be used by a particular perpetrator. It may also be the case that the perpetrator in a deliberate, intentional and previously planned way uses the “opportunity” created as a result of their employment with a given entrepreneur. It is on preventing and reacting to such cases that legislation should focus rather than trying to shift liability for an offence of an employee/ associate to the entrepreneur employing them.
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