1.- The core of the Penal Code

The penal principle of ‘societas delinquere non potest’ does not apply anymore in our country. That means that, from now on, companies committing crimes must be held accountable.

On 23rd December 2010 a new Penal Code was introduced through the Organic Law 5/2010. In it, in fact in Article 31, it establishes that legal people will be criminally accountable.

From this point on, therefore, legal people are held responsible for crimes committed both by company managers and directors as well as anybody within the company who should have been controlled by those in charge.

2.- Objectives of the Reform

This is an attempt to fight against fraud and corruption making the legal person accountable even though the actual person responsible has disappeared, has not been able to be identified or has died.

Legal people will be held responsible when crimes are committed against tax and social security authorities, against workers’ rights, scams, bribery, money laundering, urban services or against the environment.

The new Penal Code foresees the company paying for these different types of crimes, according to their gravity.

So, cases considered less serious will be bound through fine sentences, temporary closure of activities and premises, disqualified from obtaining subsidies or public aid or from contracting Public Administrations and benefiting from tax or Social Security incentives. On the other hand, in extremely serious cases the company could be suspended from its activity temporarily, intercepted judicially and even be dissolved.

The high punitive level which the new Penal Code proposes is due to the fact that it is attempting to involve legal people in the prevention and investigation of economic crimes which take place within their own area of authority. It goes as far as to value collaboration which can obtain an adjustment in the penalty.

In fact, a ‘tipping off’ effect is sought, in other words, the company should collaborate in the investigation by providing evidence to clarify penal responsibilities, whether it be new or decisive, at any point during the process.

Not only this, confessing infringement before being aware that a penal proceeding against the company exists can serve to reduce the sentence and also, partly or totally, can attempt to repair the damage created by punishable conduct so long as it is carried out before the Hearing.

The most noteworthy adjustment comprises the establishment of effective measures on behalf of the company to prevent and discover crimes which, in the future, could be committed with the means or under the pretext of a legal person.

The latter is not insignificant, because in a totally voluntary way, it provides a tool to companies so they can ‘cover their backs’ in relation to future penal responsibilities.

Those companies who implement a Protocol of internal control to prevent commitment of crimes within their organization will be able to prove that appropriate formality previously existed in these aspects and in adjusting it could even absolve penal liability.

Conclusions

In light of the seriousness of the sentences which legal people can undergo, it is essential to put in place a good Protocol of Control to illustrate company good will by following the criteria of legal and ethical behavior where this behavior is controlled as much by managers as by employees.

In line with the above, it would be useful if once a year the legal person were to submit himself to a legal audit under the supervision of independent experts who would check the efficiency of such controls. Therefore, any necessary modifications could be introduced so that the system does not become obsolete.

In this way the situation described in the title of this article would be avoided, in other words, by complying with legal requirements the legal person would avoid “going to jail”.

Jordi Farré