The Czech Act on Criminal Liability of Legal Entities and Proceedings Against Them covers criminal liability of legal entities in their own specific way. Corporate criminal liability applies to nearly all legal entities and to those individuals who work for them. Directors, management board members and employees place themselves and the companies in a high-risk situation if they are unaware of how their companies might be affected by the Act and what can be done to relieve the legal entity of criminal liability.
Even though the Act came into force eleven years ago, many businesses either still don’t know that it exists or are just now becoming familiar with it.
Corporate criminal liability applies to nearly all legal entities and to those individuals who work for legal entities, with some exceptions such as local self-government units in the exercise of public authority, foreign states and certain international organisations. It is important to note that the law does not deem a corporate entity to be able to act by itself, but acts through the representatives of its governing bodies and its employees, and it is these individuals who play a significant role in the criminal liability of legal entities.
Thus, according to Section 8 of the Act, a criminal offence committed by a legal entity is considered an unlawful act committed in its interest or during its activities if the act is committed by:
- a member of a governing body or another person in a managerial position;
- a person in a managerial position performing managerial or supervisory activities for that legal entity;
- a person exercising a decisive influence over the legal entity’s management;
- an employee or a person in a similar position performing work.
For an offence committed by an employee (or a person in a similar position) to be attributable to the legal entity, the employee needs to have committed the offence:
i. while performing his or her work, and, at the same time, the employee would need to have committed the offence:
- on the basis of a decision, approval or instruction from the legal entity’s bodies or relevant persons; or
- because the legal entity’s bodies or relevant persons failed to exercise mandatory or necessary supervision of the activities of employees or other persons under their authority, or by failing to take the necessary measures to prevent or avert the consequences resulting from the offence committed.
However, legal entities can be relieved of criminal liability if they can prove that they acted with the necessary due diligence and appropriate level of professional competence to prevent the commission of a crime or to minimise its impact.
Nevertheless, this type of relief will depend on the specifics of the case. Therefore, it is important that all above-mentioned persons (especially members of a governing body and other persons in a managerial position and all relevant employees of a company) are aware of this potential criminal liability.
For more information on corporate criminal liability in the Czech Republic, contact your CMS client partner or local CMS experts.