NORMATIVE CRIMINAL COMPLIANCE

The reform of the criminal code (Article 31bis) under the ‘Organic law 1/2015’ (in force since the 1^st of July 2015) establishes a dual pathway in attributing criminal liability to corporate entities.

Within the first route, referred to as direct attribution, a corporation can be held liable for a crime committed in their name or on their behalf, and to their direct or indirect benefit by their legal representatives or by those managers who are authorized to make decisions in the name of the legal person, or possess the faculties to distribute the resources and the personnel of the company, assigning to each member the tasks they must complete with the overall aim that these tasks are carried out in an efficient manner.

These aforementioned employees also possess the authority to exercise the control or regulation of the prevention system, reducing the probabilities of error in order to achieve the desired result within the company.

The second route, referred to as indirect imputation, is one in which the legal person can incur criminal liability, for crimes committed in the exercise of their activities and on behalf of the company and for its direct benefit by employees or associates, who being subject to the authority of the legal representatives or executives, have been able to perform a breach due to a serious failure from the aforementioned representatives or directives in their duty to monitor certain activities in order for their satisfactory fulfilment. The monitoring function, or inspection of the work must be carried out by someone with expertise in the supervised area, in addition to possessing sufficient authority to manage the employees he is in charge of. For this reason, we must emphasize both their responsibility, as well as their ability to instruct or train their personnel.

When an employee commits an offense because he has not been subjected to the appropriate measures, the following liabilities arise:

• Criminal liability for the employee for the crime committed.
• Criminal liability for the company, for the crime of the employee, and
• Liability for the administrator for infringement of surveillance requirement (Article 11 of the Penal Code).

However, if the employee commits a crime bypassing the system controls, both the company and the administrator would be exempted from criminal liability (Art. 31 bis 2). Provided that the prevention system is well established, documented, and effective.

The most common crimes are economic crimes:

• Fraud
• Punishable insolvency.
• Crimes against the Tax Office and Social Security.
• Money Laundering.

The applicable sentences for corporate liability are established in section 7 of Article 33 of the Criminal Code, which indicates seven types of sentences, in relation to severe sentences of legal persons, and without taking duration into account:

• Penalty for fees.
• Dissolution of the legal person.
• Suspension of activities.
• Closure of premises and establishments.
• Prohibition to exercise in the future, the activities within which the crime has been committed, aided or concealed.
• Ineligibility to obtain subsidies and public aid, to contract with the public sector and to reap fiscal benefits and incentives, or Social Security benefits and incentives.
• Judicial Intervention.

In light of said reform, the Attorney Generals office has released the circular letter 1/2016, on the 22^nd of January, from which we highlight one of its most important sections concerning the possibility of exemption from criminal liability.

The most notable aspect of the 2015 reform is the complete regulation in sections 2, 3, 4 and 5 of art. 31 bis of compliance programs or compliance guides, called models of organization and management:

“2. If the crime was committed by those stipulated in section a) of the previous section, the legal person will be exempt from criminal liability if the following conditions are met:

1. ^a The administrative entity has adopted and effectively executed, before the crime’s commission, models of organization and management that include the necessary surveillance measures and control to prevent crimes of that same nature or to significantly reduce the risk of their commission;

2. ^a The supervision regarding the preventative models functionality and compliance has been entrusted to an entity within the legal person with autonomous powers of initiative and control, or has been legally entrusted with the function of monitoring the efficacy of the internal controls of the legal persons.

3. ^a The individual perpetrators have committed the crime fraudulently evading the models of organization and prevention, and

4. ^a There has not been an omission or insufficient exercise of its functions of supervision, surveillance, and control on behalf of the entity to which provision 2a applies to.

In cases where the above circumstances can only be partially accredited, the situation will be evaluated with the purpose of mitigating the punishment.

3. Within small-scale legal persons, the function of supervision to which subsection 2a of Section 2 refers to, may be assumed directly by the administrative entity. For this purpose, a small-scale legal entity is one, which, under applicable law, is entitled to submit an abbreviated account of profit and loss.

4. If the crime was committed by the persons mentioned in subsection b) of Section 1, the legal person shall not be liable if, before the commission of the crime, the entity had adopted and effectively implemented a model of organization and management that was appropriate to prevent the nature of the crimes that were committed or to significantly reduce the risk of their commission.

LEGAL ADVISE

At GP Abogados we recommend all companies that are constituted as legal persons (stock corporations with limited liability etc.) as well as associations, foundations or any other type of legal entity with a legal personality, to contact us to discuss the implementation of the criminal normative compliance program, and request a free no-obligation estimate

Do Legal Persons benefit from the new Criminal Code Reform?

The new Reform of the Criminal Code benefits legal persons in that it enables their exemption from criminal liability. It would be incomprehensible for a company to assume the risk of not taking the established requirements in the Model of Organization and Management into consideration.

What do companies need to know about the new Criminal Code Reform?

To avoid committing serious infringements, the company has the obligation to monitor the activities of its employees, with the aim of preventing the commission of a crime.

When does a Legal Person incur Criminal liability?

If any employee or collaborator commits a crime, the company suffers criminal liability, even if the employee that is responsible for the crime is not identified.