The long-awaited reform of Australia’s laws regarding the criminal responsibility of corporate entities (companies) is moving closer to completion. In Australia today the prosecution of companies is far less common than the prosecution of individuals, even in relation to what might be regarded as ‘white-collar’ or business-related offending.
The Australian Law Reform Commission (ALRC) has recently completed a year-long review into corporate criminal responsibility, examining how to improve the way the law handles criminal conduct by companies. The ALRC report, entitled “Corporate Criminal Responsibility”, was tabled in the Federal Parliament on 31 August 2020.
Report commissioned due to increased corporate wrongdoing
The report was commissioned in the wake of other recent inquiries which highlighted the need for increased consumer protection against corporate wrongdoing, including the 2019 Financial Services Royal Commission into the banking and financial services industries.
The ALRC’s recommendations, if implemented, would constitute a radical overhaul of the criminal law, not only for the financial services sector but for all companies.
What did the ALRC recommend?
The ALRC report contained 20 recommendations for the reform of the law regarding corporate criminal responsibility.
The broad effect of the recommendations is to:
- standardise the way criminal responsibility is attributed to corporations;
- simplify the law in relation to the regulatory compliance burden on corporations;
- make corporations more broadly responsible for the criminal actions of those who commit certain crimes on behalf of the company; and
- increase the range of penalty and sentencing options to punish corporations more effectively.
Some of the more noteworthy recommendations include:
- Recommendation 6: The Criminal Code (Cth) should be amended such that a company is deemed to have acted if such actions are done by an officer, employee or agent of the company acting with actual or apparent authority (or someone acting at the direction, or with the agreement or consent of such a person).
- Recommendation 7: The Criminal Code (Cth) should be amended to provide that if it is necessary to establish a state of mind (other than negligence) of a company, it is sufficient to show that one of its officers, employees or agents, acting with actual or apparent authority, engaged in the relevant conduct and had the relevant state of mind, or directed, agreed or consented to such conduct. It would be a defence if the company could prove that it took reasonable precautions to prevent the offence occurring.
- Recommendation 8: The Australian government should introduce offences that criminalise contraventions of prescribed civil penalty provisions where the conduct constitutes a system of conduct or pattern of behaviour by a company.
- Recommendation 10: The Crimes Act (Cth) should be amended to require a court to consider various factors when sentencing a corporation, including:
- the size and financial circumstances of the corporation;
- whether the corporation had a corporate culture conducive to compliance;
- the extent to which the offence or its consequences ought to have been foreseen;
- whether the unlawful conduct was voluntarily self-reported;
- any advantage obtained by the corporation as a result of the offence;
- the extent of any efforts by the corporation to compensate victims and repair harm;
- any measures the corporation has taken to reduce the likelihood of it committing subsequent offences, including internal investigations into the cause of the offence, internal disciplinary action and implementing measures to improve compliance.
- Recommendation 12: The Crimes Act (Cth) should be amended to allow a court to make one or more of the following orders when sentencing a corporation:
- Requiring the corporation to publicise or disclose certain information;
- Requiring the corporation to undertake activities for the benefit of the community;
- Requiring the corporation to take corrective action, including internal disciplinary action or organisational reform;
- Requiring the corporation to facilitate redress or any loss suffered;
- Disqualifying the corporation from undertaking specified commercial activities.
- Recommendation 13: The Crimes Act (Cth) should be amended to provide that a court may make an order dissolving a corporation if the corporation has been convicted on indictment of a commonwealth offence, and the court is satisfied that represents the only appropriate sentencing option in all the circumstances.
- Recommendation 14: The Corporations Act (Cth) should be amended to provide that a court may make an order disqualifying a person from managing a company for a period of time that the court considers appropriate if that person was involved in the management of a company that was dissolved in accordance with a sentencing order.
Upon tabling the report on 31 August 2020, the federal Attorney-General Christian Porter indicated that the federal government will now carefully consider the ALRC Report and its recommendations. No timeframe has been indicated as to when the government will respond.