Crime and punishment – companies and criminal liabilities

March 12, 2014  |  Milan Šperl

If you are interested in finding out about some of the very first court decisions under the Act on Criminal Liability of Legal Entities and Related Proceedings (the “Act”), look no further. As you may already know, under the newly effective Act so far three companies have been convicted, two have received criminal orders, and charges have been dropped with regard to another.

Convictions and criminal orders

Pursuant to the Act, five legal entities have been convicted in decisions by the Regional Court in Ostrava, the District Court of Prague 1, and the District Court in Frýdek-Místek of 22 March 2013, 29 March 2013, and 18 September 2013, respectively, and received criminal orders from the Municipal Court in Brno dated 29 March 2013 and 6 December 2013.

In the first decision, a civic association was convicted of stating false data in a subsidy application and causing over CZK 50 thousand in damages, and also of stating false data concerning expenses from budgets managed in the EU’s name, which resulted in the funds being used incorrectly. The civic association thus committed a misdemeanour in the form of subsidy fraud and damage to the EU’s financial interests, for which the sentence was publication of the judgment in the daily press.   

The decision of the District Court of Prague 1 found a limited liability company guilty of failure to fulfil its legal obligations, namely for not paying prescribed social security and health insurance contributions for its employees even though it deducted the mandatory amounts from their gross salaries. In other words, the company as an employer failed to pay social security, unemployment benefits and health insurance contributions. For its conduct, which the court qualified as a misdemeanour in the form of unpaid tax, unpaid social security contributions and other similar mandatory payments, the sentence was again publication of the judgment in the press.

Another limited liability company received a criminal order from the Municipal Court in Brno for its failure to fulfil the legal obligation to pay public health and social insurance contributions. In this case, a CZK 20,000 monetary fine was imposed on the company. 

The District Court in Frýdek-Místek convicted a joint-stock company of negligence, namely for logging a larger area of forest than permitted. In doing so, the company committed a misdemeanour, for which a sanction in the form of a CZK 30,000 monetary fine was imposed. 

The Municipal Court in Brno also issued a criminal order, thereby convicting a limited liability company on account of its executive, who issued and handed over an employment confirmation with false data on the person’s income and employment record, which was to be presented with an application for a loan. The company thus enabled the person to state false data when negotiating the loan agreement and the person’s conduct caused over CZK 50,000 in damage. The company thereby committed a misdemeanour in the form of loan fraud, for which a CZK 20,000 monetary fine was imposed on the company.

Legally binding acquittal

As in the case of the decision of the District Court of Prague 1, the Municipal Court in Brno issued a decision on the conduct of an executive of a limited liability company, who as the company’s statutory body failed to pay an employee’s mandatory health insurance and social security contributions and advances for income tax payable from employment income and emoluments to the state. Since the company made all outstanding payments before the main hearing, its criminal liability ceased to exist. The court therefore acquitted the company and its executive of the indictment.  

The above-mentioned decisions of the general courts thus confirmed the previously held view that the criminal liability of companies relates in particular to economic or property-related criminal acts and/or damage to the environment. Although other crimes cannot be excluded, they will nevertheless most likely be exceptions and not the rule.