Liability on the Incorporate HK Company in case of Criminal Irregularity


It may sound weird to you that after company incorporation HK how company can directly involve in any act of crime or made liable for any criminal irregularity? You are not alone in this wondering and in earlier times it was the general perception which says that it is near to impossible that company would itself be held liable for any criminal irregularity. The reluctance to perceive this was so huge that it was even greater than to held company liable for tort or any wrong and this reluctance was supported by the argument which says that company is not a moral agent and neither it has any conscience nor any soul so how it can be made liable for any such liability? As company does not have any body nor any physical existence so for instance accused crime is so grand that it may lead to imprisonment then as company does not have any body so obviously it cannot be sentenced to the prison. Hence there is no need for imposing liability in case of criminal liability to the company after company incorporation HK.

But modern legislation rectified all these misconceptions and dry cleaned them to the depth for company formation services in Hong Kong. Modern legislation position says that; company and corporations can be made guilty for any criminal offence and court can attribute conduct of any individual to the company but there are certain conducts which company cannot commit. The offences which the company is immune to commit are offences such as those which cannot be committed through any other person by the virtue of scope or nature of offence such as one in perjury. Moreover, as per the company formation services in Hong Kong, company shall not be made indictable to those offences, where corporal punishment such as murder is the only punishment, court can grant so as company not being any physical person hence such punishment could not be granted, therefore company would not be made liable for such criminal offences. But where fine is an alternative for such punishments then it would be legitimate to held company liable for such offence and that company would be considered as having committed this offence. An example of such offence is an offence of committing “manslaughter” because for such offence, fine is considered to be as an alternative to the sentence of imprisonment.

There are number of theories justifying the criminal liability on the companies. One view justifies the imposition of criminal liability on the basis of the equating company with that of a moral agent while the other group of theorists put forward the belief that it would be appropriate to reflect collective nature of responsibility on the organisation or groups with that of a criminal liability of the company. Corporate liability with regard to criminal offence is also justified upon the argument which emphasis on imposition of this liability on the practical basis. As per this proposed application of corporate liability, effective enforcement of this law is needed to be imposed by avoiding difficulties in identifying specific person responsible for the offence, in case of a complex corporate structure of the company, in question.

Now as per the doctrinal literature, company can be held liable for the criminal irregularity, either through primary liability or vicarious liability. So, let’s find out how these liabilities can work in case of criminal irregularity.

Primary Liability for Criminal Irregularity

Offences such as of absolute or strict liability gives rise to the primary liability. Hence, wherever the statutory provisions put some duties or obligations on the part of company to fulfil then failure to obey such duties would result to the imposition of primary liability on the company. For such liability to impose after start up company Hong Kong there is no need to establish that where the complaining offence is of strict liability or absolute liability? And it would be the matter of interpretation of the statutory provision that is there any need to classify offence as being of strict or absolute liability or the general establishment of offence is sufficient to impose primary liability on the company? However, there is the need to furnish presumption of a requirement for mens rea, but this presumption is sometimes discharged or displaced so as to facilitate the offence of regulatory nature. For instance, certain offences in the Cap. 622 are of the offences which give rise to the strict liability.

Primary Liability as the Attribution of Acts of Company’s Officials

It is possible that certain conducts or acts of the company’s officials or representatives would be attributed to the company and ultimately this attribution will give rise to the primary liability on the corporation. In order to establish primary liability through the attribution of conducts or acts of the senior officials of the company, notion of “directing minds and will” shall be approached and referred, where required. As per this notion, company shall suffer primary liability only in the case where it has been established mens rea and actus reus against the person(s) who purportedly introduces or identifies themselves, as the company.

Let’s refer to the case law so as to understand this situation much better. Case of the St. Regis Paper Company refers to the situation where company was involved in the manufacturing of coloured papers and board from the waste paper. Technical manager of the company was supposed to comply with the standards of Environment agency and it was found that he submitted false reports to the Environment Agency. Later on, he was convicted on the matters of forgery, but the question arose that will the company shall also be held liable for the offence Technical Manager committed or he alone shall bear this conviction? English Court of Appeal held that; company shall be made liable for offence, if and only if the person who committed the relevant criminal offence shall found to be the person who is the legitimate directing mind and will of the company. The circumstances reported that Technical Manager reported to the Operations Manager of the company and operation manager then reported to the managing director of the company. MD of the company then reports to the divisional technical manager and the Divisional Environment Director who in turn chairs and forms the committee of about 8-10 divisional directors. It was held that Technical Manager was responsible to comply with the standards set by the directors and on this arguments court concluded that;

It was not thus open for the jury to conclude that; Technical Manager was the person who was directing the mind and will of the company.

Vicarious Liability for Criminal Irregularity

Although the application of vicarious liability for corporate criminal irregularity is used less in criminal law and is being used more often in the civil law but still court applies vicarious liability on the company so as to treat the regulatory offences. Vicarious liability is imposed on the company, where there is the evidence of strict or absolute liability. Moreover, courts are found to apply vicarious liability in case of statutory offences and the situations where there is the availability of the due diligence or other defence. But it must be noted that; it is not mandatory that only strict liability for the regulatory offences shall amount to the imposition of vicarious liability and neither is the case where mens rea for the primary offender is required in order to enact vicarious liability on the part of the principal or company. Hence, it can be well said that, wherever the statutory offence amounts to the imposition of vicarious liability on the principal or company, then this will be the matter of interpretation of statutory provisions.

Imposition of Corporate Liability in Complex Corporate Structures

There has been much debate on the principles of the corporate liability after start up company Hong Kong as critics believe that; principles of corporate liability, based on the Identification theory, is unable or found to be failing to be applied in large organisation or companies where the functions and set of responsibilities are widely diffused on account of complex corporate structure. The one legal reference to this criticism is the case of Ajax Engineers and Surveyors Ltd where construction company was the respondent on account of prosecution related to the accident which caused the crash of lift from 17 floors and killing 12 building workers as the result of this case. In this case prosecution was successful in getting company convicted of this breach of duty of care to their employees. However, defendant pleaded guilty and two of the people who were convicted directly for such manslaughter, had their convictions quashed, as the result of plea of appeal before the court. Hence this reference clearly shows how complex corporate structure can help escape the direct culprits, who have caused the harm and those who shall be held criminally liable, get escaped as a result of the complex corporate structure. In England there have been number of cases put forward before the Hon’ble Court related to the excessive manslaughter, by the prosecution but only few of them were successful in getting company, criminally liable for the committed offence. The eminent ones are the cases of Free Enterprise Ferry Disaster in 1987 and the Southall Rail Crash of 1997.

It is said that such limitations could have been avoided with the extension of strict liability and the absolute liability, but this extension would not be of any help where there exist some faults even before holding company, criminally liable. However, there are plenty of overseas legal references available which can help to deal with this legal implication and so as to determine the corporate faults. For example, In England the statutory offence of manslaughter is enacted which is operated on the base of the failures on the part of senior management of the company and there is no need to identify any single person as the culprit, to impose criminal liability on the principal. If we talk about situation in Australia, we shall come to know that, in case of any federal offence the common law provisions related to the corporate liability are replaced with the concept of organisational blameworthiness and thus it further extends the scope of the corporate liability. As per these extensions of the corporate liability, a company shall consider having committed the offence if any officer, employee or agent of the company has committed the offence, either within their apparent authority or actual authority. If to accommodate mental elements of the offence there is no need to establish that certain director or official of the company has the mental state to commit this offence, especially in the situation where the corporate culture of the company itself give rise to such occurring of offence.

Individual Liability for the Corporate Criminal Liability

Now the discussion on the corporate criminal liability will be concluded by shedding some light on the issue of individual liability. Any individual who have committed the criminal offence shall considered to be the principal offender, irrespective of the fact that whether such offence was carried out on the behalf of the company or not. Not only this, but any individual would still be held criminally liable for the offence in question, if company is the principal offender. But this could not be considered as something absolute and there is the need to assess the extent of individual liability on the case to case level. Therefore it is required that, statue might then provide for the situations or circumstances where the directors or any official of the company shall be held liable in relation to the offence committed by the company.