On the first of January last year, the Czech Republic took another step towards convergence with legal orders of developed countries of the EU by adopting an act on criminal liability of legal entities. The new law also places considerable demands on companies undertaking business within the scope of activities permitted by law, especially on their statutory authorities, i.e. boards of directors, CEOs, executives, etc.
The law is built on construction of liability based on fault for crimes listed, randomly: violation of a copyright, nonfulfilment of a duty to inform in tax procedures, distortion of data about the state of business management, arranging an advantage in placing a public contract, unauthorized waste disposal or crimes including corruption. Legal entities shall be criminally liable on the basis of an “imputable” act committed by authorized representative bodies or persons in charge of management, but also by authorised persons of legal entities and employees of companies, including persons working in the so called “Schwarz system”, i.e. providing business services to the company instead of being employed.
Criminal liability of a legal entity shall pass to all legal successors, which means that it does not cease to exist by merger or division. The law imposes punishments ranging from dissolution of companies – threatening solely to legal entities established for committing criminal activity – to forfeiture of property with crimes of an extreme gravity, confiscation of a thing, pecuniary punishments, prohibition of activities, prohibition of performance of public contracts and receipt of subsidies, and publication of a judgment which punishes by that it takes away from legal entities a good reputation implied by law, and it may considerably disadvantage them in the economic competition.
As for companies undertaking business honestly, there is the snag of the law which consists in the said “imputability” of the acting of employees. Imputability of acting is very broad and the company is criminally liable if such acting is performed on its behalf or in its interest or within the scope of its activities. From such “imputed” criminal liability the legal entities may be only exempted by that they prove that they carried out the so called “exculpatory” measures which represent protection of the company against consequences, sometimes also unintended consequences of acting of the above-mentioned persons (with crimes committed due to negligence). In practice, it means proving that through internal directives and measures the authorized representative bodies did everything in order to avoid or prevent such acting. Authorized representative bodies of companies have a duty to act with due and reasonable care, and thereto there is newly added adoption and exercise of the above-mentioned “exculpatory” measures. In case of occurrence of damage to companies in the form of imposition of punishment due to absence of “exculpatory” measures, the authorized representative body is liable for such damage incurred by the company.
Therefore, the statutory authorities are recommended to have internal directives and procedures which will avoid and prevent criminal activity professionally prepared. Only in this way it is possible to continue to carry out functions of an authorized representative body with a tolerable risk.