In Slovakia, a new Act No. 91/2016 Coll., on corporate criminal liability (the "Act") which introduces the concept of criminal liability of legal entities shall become effective as of 1 July 2016.
The situation on prosecution of legal entities will change as until now, Slovak legislation solely recognized the so called quasi-criminal liability of legal entities. The Act contains provisions governing the conditions for the establishment of criminal liability of the legal entity, types of crimes and penalties as well as the specifics of criminal proceedings as such.
APPLICATION OF THE ACT
When will the Act apply?
Following the territoriality principle, the Act shall apply to the criminal offences committed by a legal entity within the territory of Slovakia. Based on the principle of the seat, the Act shall also apply to the criminal offences committed outside the territory of Slovakia by a legal entity having its seat in Slovakia including a foreign legal entity's branch with its seat in Slovakia.
Furthermore, the Act shall also apply to criminal offences committed outside Slovakia, by a legal entity having its seat outside Slovakia, if committed for the benefit of a (i) legal person with its seat in Slovakia, (ii) citizen of Slovakia or (iii) a foreigner with permanent residence in Slovakia.
When will the company be criminally liable?
The legal entity shall be liable for the offences of its statutory body (e.g. managing director or member of the board of directors), its controlling or supervising body (e.g. member of the supervisory board) or any other person entitled to represent the legal entity or decide for the legal entity (e.g. branch manager, proxy or other empowered person) if committed in favour of the legal entity, on its behalf, via such legal entity or within the scope of its business.
Moreover, the legal entity will also be liable in cases when these supervising persons (even negligently) enabled other employees or representatives to commit a crime.
It is important to mention that the liability of the legal entity does not depend on the prosecution of the managing director or other representative.
The criminal liability cannot be avoided by liquidation proceedings, dissolution or declaration of bankruptcy.
What criminal offences can a legal entity commit?
The Act provides a comprehensive list of the criminal offences that can be committed by a legal entity such as drug trading, human trafficking, sexual abuse, money laundering, PC data security and system integrity, illegal employment, breach of consumer rights and unfair commercial practices, tax offences, terrorism and extremism, environmental offences, corruption and bribery, child pornography, etc.
What type of penalties can be imposed?
Under the Act, the following penalties may be imposed on legal entities:
a. dissolution of the legal entity;
b. assets forfeiture;
c. forfeiture of individual assets;
d. financial penalty up to EUR 1,6 million;
e. prohibition on performing business activity for a period of up to 10 years;
f. prohibition on receiving state or similar subsidies, grants or subventions for a period of up to 10 years;
g. prohibition on receiving aid and support from the EU funds for a period of up to 10 years;
h. prohibition of participation in public procurement tenders for a period of up to 10 years;
i. publication of the sentencing judgement.
The duly imposed punishment under points e. - h. above, will be visible from the Commercial Register as the registration court will register such information ex officio on the basis of the respective judgment.
CONCLUSIONS AND RECOMMENDATIONS
The Act introduces a significant change in the Slovakian business environment by enabling the prosecution of corporations. The newly adopted concept of corporate criminal liability shall mean the possibility to impose a penalty directly on a legal entity for a crime committed by a natural person entitled to act and decide on behalf of the respective legal entity. At this stage, the application of the Act by the prosecutor and the Slovak courts is hardly to predict in practice. Given the absence of relevant case law it is difficult to estimate what penalties may be expected in practice.
Due to the possible impact on day-to-day business of corporations and entrepreneurs, we assume that any eventual risk needs to be properly considered and reduced to minimum. As any possible criminal actions against the company could easily damage a good reputation and also negatively impact the position on the market we would highly recommend that our clients to get familiar with the new Act and in particular consider the implementation of certain precautions in order to mitigate the risk of criminal prosecution. For the purpose of avoiding or minimising such risk the respective corporate compliance policies, whistleblowing regulations and similar programs should be implemented.
In case you would like to prevent and mitigate any risk within your corporation, we would be happy to provide you with further assistance in this respect.
We trust this alert is helpful to your business. In case of any questions, please do not hesitate to contact us.
By Michaela Stessl, Country Managing Partner, and Daniela Koncierova, Associate, DLA Piper