KPMG: Chamber of Deputies likely to override president´s veto of Corporate Criminal Liability bill

Under the new law, an unlawful act committed in the name or interest of a corporate entity, or within its activity, will constitute a criminal act of such entity. Corporate entities can only be prosecuted for crimes explicitly defined in the Act. These include tax evasion, failure to pay obligatory insurance premiums, distortion of data on financial performance or assets and liabilities, duplicity in awarding public contracts, and environmental crimes. Corporate entities are threatened with punitive measures including fines, restriction of activity, asset forfeiture or bans on receiving subsidies.

Corporate criminal liability arises where unlawful acts of certain individuals may be attributed to a corporate entity. This may occur if an unlawful act is committed by a statutory body (or its member), persons responsible for management and control functions within the entity, or persons exercising influence over the management of the entity.

Unlawful acts by employees may also be attributed to a corporate entity, where:

• an employee has committed the unlawful act based on a decision, approval or instruction of a statutory body or persons exercising management and control activity;
• the management personnel mentioned above have failed to take measures required or reasonably expected by law, in particular failure to exercise obligatory and necessary control over their employees‟ activity.

The Corporate Criminal Liability bill thus indirectly puts a strain on the risk management function of corporate entities. Also, for certain acts the corporate entity to whom it may be attributed, and the individual who has committed it may both be prosecuted, whereas the corporate entity may be criminally prosecuted even where the individual culprit has not been identified.

The Corporate Criminal Liability Act is expected to become effective at the beginning of 2012, despite having being vetoed by the president. The Chamber of Deputies has already added the new vote to its December agenda, and is likely to override the president´s veto.

Martin Kofroň, mkofron@kpmg.cz, tel.: +420 222 123 745
Eva Doložílková, edolozilkova@kpmg.cz, tel.: +420 222 123 696

Source: KPMG Česká republika, s.r.o.; Financial Update, December 2011