Offences committed by companies
Principle
This section deals with the circumstances in which a corporation or limited company ("a company") can be prosecuted for criminal offences committed in the course of its operations. It covers:
- the general principles of corporate liability;
- evidential issues;
- who should be prosecuted;
- liability of liquidated/dissolved companies.
For information on specific offences (including corporate manslaughter) <refer to Corporate Manslaughter and other relevant sections, elsewhere in this guidance>.
Guidance
Definition of Corporation
"Corporation" normally means a company registered under the current Companies Act or one of its predecessors (Royal Charter/Special Statute are rare forms of incorporation).
A corporation is a legal person which can only act or form an intention through its directors or employees. A corporation can commit offences ranging from the relatively trivial to the serious.
Unincorporated bodies do not incur criminal liability at common law because they are not a "legal person", although members of the unincorporated body can be individually liable. In relation to statutory offences, however, unincorporated bodies can be criminally liable <Archbold 1-78>. In Clerk to Croydon Justices, ex parte Chief Constable of Kent, 1989 Crim. LR 910 is a case where an unincorporated body was held to be liable, in this instance, for parking offences as a result of it being the registered keeper of the vehicle in question.
Establishing Corporate Liability
Corporate liability may be established by:
- Vicarious liability for the acts of a company's employees/agents. This has limited application at common law, e.g. public nuisance. However, statutes frequently impose vicarious responsibility on companies, <Archbold 30-21 to 30-26>.
- Non-vicarious liability by reason of the identification principle (including offences requiring mens rea), <refer to Corporate Liability - Offences requiring Mens Rea - The Identification Principle, below in this section> which determines whether the offender was "a directing mind and will" of the corporation (Lennard's Carrying Co. v Asiatic Petroleum Co. [1915] A.C. 705 and <Archbold 17-30>).
Vicarious Liability
A corporate employer is vicariously liable for the acts of its employees and agents where a natural person would be similarly liable (Mousell Bros Ltd v London and North Western Ry Co [1917] 2K.B. 836).
When considering vicarious liability, you must first consider the terms of the statute creating the offence. It may require mens rea, yet impose vicarious responsibility. Conversely, it may create strict liability without imposing vicarious liability.
Normally, vicarious liability will arise from offences of strict liability. These are offences which do not require intention, recklessness, or even negligence as to one or more elements in the actus reus. All traffic offences carry strict liability unless they expressly require fault. If an offence of strict liability is committed by an employee of a company in the course of his employment then the company may also be criminally liable.
For a more detailed discussion on this topic, see <Archbold 17-25 to 17-29>.
Corporate Liability - Offences Requiring Mens Rea - The Identification Principle
Companies may be criminally responsible for offences requiring mens rea by application of the identification principle.
This principle acknowledges the existence of corporate officers who are the embodiment of the company when acting in its business. Their acts and states of mind are deemed to be those of the company, they are deemed to be "controlling officers" of the company.
Where a company is relying upon a defence that requires evidence of a belief or other state of mind, this must be the belief or state of mind of such a controlling officer.
The leading case of Tesco Supermarkets Ltd v Nattrass [1972] AC 153 restricts such corporate liability to the acts of:
"The Board of Directors, the Managing Director and perhaps other superior officers of a company who carry out functions of management and speak and act as the company."
In seeking to identify the "directing mind" of a company, you will need to consider the constitution of the company concerned (with the aid of memorandum/articles of association/actions of directors or the company in general meeting) and consider any reference in statutes to offences committed by officers of a company.
The scope of the identification principle is subject to two qualifications:
The Board of Directors may delegate some of their responsibilities of management, giving to the delegate full discretion to act independently of any further instruction from them. The identification principle applies to the delegate acting within the scope of the delegation. See Esseden Engineering Company v Maile [1982] RTR 260.
In exceptional circumstances, the limited definition of controlling officers above may be inappropriate where its application would defeat the intention of the particular provision, which must be examined for content and policy. In Meridian Global Funds Management Asia Ltd v Securities Commission [1995] WLR 413, the knowledge of an investment officer was held to be attributable to the company.
The identification principle does not permit the creation of a corporate mens rea by aggregating the knowledge/states of mind of a number of (controlling) officers. Several innocent states of mind cannot be aggregated to produce a single guilty corporate one, as held in Crown v P & O European Ferries Ltd [1990] 93 Cr App R.
For a more detailed discussion see <Archbold 17-30 to 17-33>.
Statutory Provisions
Legislation may create an offence which makes express provision for criminal liability of a corporation itself (normally in the corporation's capacity as an employer).
In the absence of any requirement of mens rea, if the statutory duty is breached, the company is criminally liable. This is as a result of a failure to comply with the duty imposed upon the company itself and not because of any vicarious liability, nor of the application of the identification principle: Crown v British Steel Plc [1995] CLR 654.
A statute may also impose a specific vicarious liability upon a company in its capacity as an employer for the acts of an employee: Griffiths v Stude Bakers Ltd 1924 1KB 102.
Limitations governing Corporate Liability
Certain limitations govern corporate liability:
- the offence must be punishable with a fine (this excludes murder, treason, piracy);
- a company cannot be liable for offences which cannot possibly be committed by an official of the company in the scope of his employment, e.g. rape;
- a company can be party to a criminal conspiracy, but only with at least two other conspirators who are human beings - including at least one who is an appropriate officer of the company and acting within the scope of his authority.
Evidential Considerations
The legal basis of any corporate prosecution must be fully considered at review and noted in detail on the file.
Evidential difficulties may arise where the company concerned has a diffuse structure, because of the need to link the offence to a controlling officer. The smaller the corporation, the more likely it will be that guilty knowledge can be attributed to the controlling officer and therefore to the company itself.
It is crucial that you ensure that the corporation is fully and accurately named in the summons/indictment. If necessary, you should conduct a company search. Later amendment of the name may not be possible Marco (Croydon) Ltd trading as A&J Bull Containers v Metropolitan Police 1984 RTR 24.
The evidence must set out relevant employer/employee relationships, in order that both corporate liability and the admissibility of any admissions by an employee against a defendant corporation may be established Edwards v Brooks (Milk Ltd) 1963 3 All ER 62.
In offences requiring mens rea, the controlling officer(s) must be clearly identified and their status and functions established. The required mens rea of at least one controlling officer of the company must also be established.
Where a number of officers in a company have been concerned in the act or omission giving rise to a potential offence but none individually have the required mens rea, it is not permissible to aggregate all states of mind of the officers to prove a dishonest state of mind: Armstrong v Strain [1952] 1 All ER 139. See also Crown v P & O European Ferries Ltd [1990] 93 Cr app Rep 72.
Who should be prosecuted?
Decisions on whether to bring a prosecution will be subject to the principles set out in the Code for Crown Prosecutors.
For offences of vicarious liability, e.g. most motoring offences, you should consider prosecuting both the company and the employee driver. You should not prosecute the company, however, for offences committed by an employee driver during his employment but beyond the employer's influence or control, e.g. traffic light offences. Care must be taken to consider defences specifically given to employers or employees by statute.
A company cannot be prosecuted for offences requiring mens rea committed by employees who are not controlling officers. Such a prosecution would offend the identification principle <refer to Corporate Liability - Identification Principle, above in this section>. However, you may consider prosecuting the employee in an individual capacity.
It is likely that any corporate prosecution would be linked to the prosecution of a controlling officer and/or other employees.
If the evidential test is satisfied, you will need to consider a variety of public interest factors. These include the likely penalty and gravity of the offence, the prevalence of the offence, whether that corporation alone can be prosecuted (there being no individual against whom charges could be brought) and whether, in relation to minor offences, there is a likelihood that the company would re-offend.
Corporations Dissolved/Liquidated
The dissolution of a company has the same effect as the death of a human defendant in as much as the company ceases to exist.
It is possible, however, to apply for an order to declare the dissolution void or to restore the corporation to the register under Section 651 of the Companies Act 1985.
Section 651(4) (as amended by the Companies Act 1989) imposes time limits on such applications, in that they must be made within 2 years of the date of dissolution.
Applications under Section 651 are restricted to "interested parties", which covers The CPS when seeking to commence/continue a prosecution.
In relation to liquidated companies, a prosecution may still be brought against a company notwithstanding that is has gone into liquidation.
The procedures differ depending on whether the company has been wound up voluntarily or by order of the Court.
When a winding up order has been made by the Court, or a provisional liquidator has been appointed under Section 130(2) of the Insolvency Act 1986, you must not commence against the company, except by leave of the Court.
In cases where a corporation is being wound up voluntarily, you will not require the leave of the Court in order to commence/continue with proceedings against the corporation. The Court has the power, however, to restrain proceedings on the application of the liquidator.
Procedure
For procedure on charges against corporations, see Section 46, Magistrates Court Act, 1980 <Archbold 1-242 to 1-243>, and see Section 33 Criminal Justice Act 1925 <Archbold 4-101 to 4-102>.
Agencies other than police, e.g. DTI, HSE, are frequently involved in investigating and/or prosecuting offences concerning corporate liability. It is important that you communicate with any other agency involved in the case at an early stage to ensure effective liaison and co-operation. <refer to Relations With Other Prosecutions Agencies, elsewhere in this guidance>.
These cases can be complex and sensitive and, therefore, you may require early involvement of Counsel before making the decision on whether or not to proceed with the case.
Useful links
<Corporate Manslaughter, and other relevant sections, elsewhere in this guidance>
<Archbold 1-78>
Clerk to Croydon Justices, ex parte Chief Constable of Kent, 1989 Crim. LR 910
<Archbold 30-21 to 30-26>
Lennard's Carrying Co. v Asiatic Petroleum Co. [1915] A.C. 705
<Archbold 17-30>
Mousell Bros Ltd v London and North Western Ry Co [1917] 2K.B. 836
<Archbold 17-25 to 17-29>
Tesco Supermarkets Ltd v Nattrass [1972] AC 153
Esseden Engineering Company v Maile [1982] RTR 260
Meridian Global Funds Management Asia Ltd v Securities Commission [1995] WLR 413
Crown v P & O European Ferries Ltd [1990] 93 Cr App R
<Archbold 17-30 to 17-33>
Crown v British Steel Plc [1995] CLR 654
Griffiths v Stude Bakers Ltd 1924 1KB 102
Marco (Croydon) Ltd trading as A&J Bull Containers v Metropolitan Police 1984 RTR 24
Edwards v Brooks (Milk Ltd) 1963 3 AER 62
Armstrong v Strain [1952] 1 All ER 139
Crown v P & O European Ferries Ltd [1990] 93 Cr App Rep 72
<Archbold 1-242 to 1-243>
<Archbold 4-101 to 4-102>
<Relations with other Prosecutions Agencies, elsewhere in this guidance>
Casework Bulletin No. 5 of 1997
v1.0