How are legal persons punished?

What does corporate punishment look like?

The legal regulation of criminal liability of legal persons is extracted from the Criminal Code and regulated by a separate law on criminal liability of legal persons. Several reasons led our legislators to introduce this legislation into Czech law. Firstly, we were perhaps the last EU country that lacked such a regulation, and secondly, there were more and more cases where some members of the statutory bodies of companies managed to absolve themselves of liability by referring to the decision of the collective body, and some criminal offences went unpunished.

However, there are still opponents of the introduction of criminal liability for legal persons who say that the legal person is de facto a fiction and acts vicariously, or that in the case of legal persons there are no prerequisites for culpability. Nevertheless, the views that consider the legislation to be necessary have prevailed.

Which legal entities are criminally liable?

The law generally assumes the possible liability of all legal entities, but it explicitly excludes only the Czech Republic and local self-government units in the exercise of public authority (i.e. municipalities and regions, if they exercise public authority).

What offences are covered by the Act?

The prosecutable offences are again defined negatively by the law, i.e. a legal person may commit any offence as a natural person , except those which the law directly states. By the nature of the case, it is clear that a legal person cannot commit, for example, the offences of affray, bigamy, child abandonment, drunkenness and other acts that we immediately associate with natural persons. On the contrary, it will therefore be mainly property crimes, crimes related to corruption (subsidy fraud or bribery) and crimes related to environmental threats.

What are the conditions for committing a crime?

Just because a company’s employees act unlawfully does not mean that the entire company can be prosecuted. In this context, only the unlawful acts committed by them are pursued :

• the statutory body or a member of it (for example, the chairman of an association or the managing director of a company),
• a person who carries out a management activity (i.e. a manager or managing director),
• a person in a leading position,
• an employee in the performance of his or her duties under the direction of a supervisor (or even without such direction, unless the supervisor has taken such steps as may reasonably be required to prevent the employee from taking such action).

In doing so, the persons concerned must be acting on behalf of or in the interests of the legal person.

Can we put the company behind bars?

Just as we cannot imagine a legal person getting into a fight with someone, we cannot expect to put a legal person in jail. The choice of penalties will therefore be somewhat more limited than in the case of individuals. They include:

Dissolution of the legal person

A court may dissolve a legal person if its activities consisted wholly or mainly in the commission of criminal offences. In the case of certain specific legal persons, such as banks, insurance companies, securities dealers, credit unions, the opinion of the Czech National Bank must be sought before any dissolution. Upon the legal force of the decision imposing the penalty of dissolution of a legal entity, the legal entity enters into liquidation.

Forfeiture of assets

A court may forfeit property (or only part of it) when a legal person is convicted of a particularly serious crime by which it has obtained or attempted to obtain a pecuniary benefit for itself or another, or in other cases where the Criminal Code allows such a forfeiture. In the case of banks and other similar legal persons, it is again necessary to obtain the opinion of the Czech National Bank.

Monetary penalty

Monetary penalties are imposed on the basis of the so-called daily rate principle, whereby the amount of the daily rate and the number of penalties are determined. The daily rate is a minimum of CZK 1 000 and a maximum of CZK 2 million. The court shall take into account the financial circumstances of the legal person when determining the amount.

The forfeiture of the thing

The penalty of forfeiture of property or other assets is imposed under the same conditions as for natural persons, i.e. in accordance with the Criminal Code.

Prohibition of activity

The activity may be prohibited for a period of 1 to 20 years. It is essential that the offence was committed in connection with the activity of the legal person. Thus, part of the normal activities of the company were, for example, fraud and the like.

Prohibition of keeping and breeding animals

If (for example, in the case of an agricultural cooperative( animal cruelty occurred, i.e. if the offence was committed directly in connection with the keeping of animals, then it is the prohibition of keeping animals that can be imposed as a penalty.

Prohibition from performing public contracts or participating in public tenders

The ban can be imposed for a period of 1 year to 20 years. Again, the condition is that the legal entity’s offence was related to public procurement, for example, in influencing, bribing, etc.

Prohibition on receiving subsidies and subsidies

A ban can also be made for 1 year to 20 years.

Publication of the judgment

The somewhat unusual penalty was included in the law mainly to protect the public. The court may impose the penalty of publication of the judgment at the expense of the legal entity in the media if it concludes that it is necessary to make the conviction known to the public (for example, if the activities of the company in question have a wide reach and affect a large number of people).

From the statistics currently available, the most frequent prosecutions of legal persons to date have been for economic and property crimes. The penalty imposed was usually a ban on activity, followed by a fine and the dissolution of the legal entity. However, in the case of dissolution of legal persons, the companies were almost always companies that did not carry out activities.

Agreement on guilt and punishment

Even serious criminal cases can nowadays be terminated using this agreement. The accused legal entity promises to waive its right to a trial and the prosecution promises in exchange to ask the court for a lighter sentence.

Effective contrition

In the case of certain offences, a legal person can, in the vernacular, “save itself” (i.e., free itself from criminal liability) if it voluntarily refrains from further wrongdoing and at the same time:

• removes the danger that has arisen to the interest protected by the criminal law,
• or prevents the harmful consequence,
• or remedies the harmful consequence,
• or makes a report of the offence to the public prosecutor or the police at a time when the danger to the interest protected by the criminal law could still have been eliminated or the harmful consequence of the offence could still have been prevented.

However, this possibility applies only to a limited group of offences. It cannot be applied, for example, to the acceptance of a bribe, bribery or indirect bribery, bid rigging and bid rigging and other offences listed in the Act.

Differences from the criminal liability of natural persons

For natural persons, criminal liability ceases upon the death of the perpetrator. However, in contrast, in the case of legal persons, the criminal liability of the legal person is transferred to all its legal successors. Such a situation may arise, for example, in mergers or divisions. Our legal regulation does not allow legal persons to escape criminal liability, for example, by merger, where the original legal persons are dissolved and another new entity is created at the same time. The criminal liability of the original legal entity will simply pass to the newly created entity.