The new Criminal Code adopted by the House of Representatives on 22 February 2024 contains a number of relevant changes for companies and their executives and directors. In this contribution, you will find a description of the increased risks, 5 tips to manage them and a summary of other interesting innovations.
Increased financial risks
The new Criminal Code grants the court the ability to mediated companies and individuals to be hit much harder financially. The brand new "money penalty", which on top of the already existing fine and forfeitures may be imposed, namely, a sum not exceeding three times the profit the person made or hoped from the crime, must be paid. In doing so, the court takes into account the person's means. Thus, the greater the financial capacity, the higher the potential additional fine.
In addition, Directors and executives more easily in the crosshairs of criminal courts for crimes committed by others within the company. Indeed, it is now expressly provided that abstention or failure to act, e.g. in the context of a directorship or leadership position, can also constitute an act of participation in a crime. Directors or executives who picked up on certain signs of criminal behaviour (e.g. toxic leadership) but knowingly failed to act to prevent or stop it can thus be prosecuted as participants in that crime.
5 tips
The criminal In other words, risks increase significantly for companies and their executives and directors under the new Criminal Code. With the following 5 tips you can manage these risks:
- Use your influence and control power active as a director or executive and always ensure a written trackof the questions you ask about, or the protest you make against, a particular course of action within the company.
- Appeal to the delegation of authority. This entails transparent and written determination of who is responsible for performing a particular task of supervision or management. If the delegation is done correctly and to a sufficiently competent and qualified person, the (other) directors can avoid criminal responsibility for crimes committed in the context of the delegated task.
- Close a directors' liability insurance off. While such insurance does not cover any fines to which a driver would be criminally convicted, it does cover the cost of criminal defence.
- As a company, pay due attention to a decent internal organisation, effective compliance and self-monitoring. This can be done by making certain relatively simple adjustments to the company's structure or policies, creating supervisory mechanisms or, if necessary, reorganising its operations.
- Use the upcoming period of two years before the new Penal Code comes into force to cover yourself and your company to the maximum against any criminal conviction. Our firm can, of course, assist you in this regard.
Alternative penalties for businesses
The new Penal Code expands range of penalties which may be imposed on companies for relatively minor crimes also from. Indeed, today a company can be punished "only" by a fine, a special forfeiture, a ban on carrying out an activity, the closure of an establishment, the publication of the decision and/or (in limited cases) the dissolution of the legal entity. The new Penal Code adds the following penalties (in addition to the new monetary penalty mentioned above):
- The service penalty, which requires the company to perform certain services for the benefit of the community for a budget not exceeding €360,000. In other words, a community service penalty for companies. According to the legislator, this could be a way for a convicted company to improve its "restore image". However, as with community service, this punishment can only be imposed if the company agrees.
- The probation sentence, which requires the company to comply with certain general and special conditions during a period not exceeding two years. This penalty too can only be imposed after the agreement of the company concerned.
- The guilty verdict, where a conviction in principle is pronounced but no sentence is imposed. This is possible when the offences are of low gravity or if too much time has elapsed since the offences. Today, the simple plea of guilty is only possible in the latter case.
- The fine obviously continues to occupy an important place in the sentencing of legal persons, and can be imposed under the new Penal Code both as a principal and as an additional penalty. Specifically, this means that a company can be sentenced to two fines, one as a principal penalty and one as an additional penalty, or to a fine and a pecuniary penalty discussed above.
- New professional/management ban?
- For directors and managers in addition to the new cash penalty and the explicit inclusion of participation by abstention discussed above, the introduction of the professional ban as a general additional penalty is relevant.
- Today, the administrative and professional ban provided for in Royal Decree No. 22 of 24 October 1934 is reserved for persons convicted of certain forms of white-collar crime and bankruptcy offences and can be up to 10 years. Under the new Criminal Code, a professional ban can be imposed on any convicted person who has seriously abused his profession, but limited to 5 years. The criminal court may also reduce, suspend or terminate the duration of the imposed professional ban.
- Although the legislator's intention is to lift all other special professional bans, it is not yet clear whether this will actually happen.
The new Criminal Code thus contains many innovations. Practice will show whether the ambition to achieve an accurate, simple and coherent Penal Code will be realised. In any case, the possible accumulation of various fines, monetary penalties and various corporate forfeitures looks particularly severe rather than straightforward.
