Corporate Crime: Types, Consequences, and Legislations in the UK

This essay discusses corporate crime, focusing on types of crimes, consequences, and governing legislations in the UK. It explores the criminal liability of corporations and the impact on stakeholders. The essay covers corporate fraud, bribery, and tax evasion.

CRIME ESSAY

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Facts........................................................................................................................................3
Criminal Liability of a Corporation........................................................................................4
Types of Corporate Crimes in United Kingdom and Various Governing Legislations.........5
Deferred Prosecution Agreements and How these Agreements Got Implemented...............9
Application of the Above Mentioned Laws on the Given Facts and their Consequences.....9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
A crime is an act or an omission which attracts legal punishment and is prohibited by the
law. Various authors have defined the word crime in their own terms. According to Blackburn
crime refers to “all those acts which attracts legal punishments and are offences against the
whole society.
It is a general perception that people who are less educated will be indulged in the
criminal activities. But in the present time many educated people are also committing crimes of
different nature. These crimes are generally related to gain some financial benefits. If the crime
has been committed by an educated person which is a financial crime in nature then it will be
known as White Collar Crime. These types of crimes basically involves where a person who
belong to the upper society tries to deceive the people for his personal financial gains (Akbar,
2019). The main aim behind these types of crime is to obtain money through committing fraud.
The Corporate Crime is one of the example of White collar crime where the management or the
directors of the company tries to deceive its investors by showing various false things about the
company for attracting more investors. The effects of the corporate crimes are far greater than

the traditional crimes such as theft, hurt etc. because corporate crimes directly make the negative
impact upon the economy of a country. It also affect the market as investors starts losing trust in
the market. In this report one fact based hypothetical problem will be discussed related to
corporate crime. It will also be discussed that how various legislations can be used to punish
people who are involved in these types of crime. The researcher will also focus upon the
aftermath results of these crimes upon the stakeholders of the company. (Bernat and Whyte,
2019).
MAIN BODY
Facts
The Rainbow Ltd is a company which was incorporated in UK in the year 2017. The
company was dealing in the telecommunications. The company has done certain manipulations
in the accounts and it has overstated its profit. Due to this the value of shares of this company got
increased. (Binder, 2016). These manipulations in the books of accounts of the company were
done in order to attract more investors. The chairman of the company Mr John was involved in
all these manipulations. This scandal was disclosed in 2019 and due to this disclosure most of its
investors lost their money. The employees of the company also faced certain financial and
mental issues. There were various evidences available such as misappropriated accounts of the
company which were sufficient to make the company criminally liable. It was also found that the
company was evading the tax since a long time and the guidelines issued by HMRC for the
prevention of tax evasion were not properly implemented. The company's accounts were also
audited in an inefficient manner (Bleustein, Kelleher and Zeitz-Winston, 2015).
In the further investigation it was found that there were no proper safety and health
measures for the employees of the company due to which Mr Fredrick, an employee of the
company died when he was discharging his duty in the scope of its employment.
Here the researcher will examine the above problem with the help of various legislations passed
by the Parliament of UK.
The researcher will try to focus upon various types of crime which a company can
commit for which it can be held criminally responsible.

Criminal Liability of a Corporation
It is a well settled principle of English Law that a corporation will be having a separate
legal entity from its owners and shareholders. The company will be regarded as an artificial
legal person. It is also a proven fact that the directors and the owners of the company are the
main people who are responsible for the functioning of a company.(Craig, 2015). In UK to prove
that a corporation has committed a criminal offence certain things has to be proved beyond
reasonable doubt that are “Actus Reus” and “Mens Rea”. Actus reus here means that the
company has committed such an act which is prohibited by the law. Mens Reas means the guilty
state of mind of the corporation while committing that prohibited act. It is also a known fact that
a corporation is a non living being, thus cannot form any guilty intentions. It is their owners or
directors who can develop a guilty mind and actually commit the acts prohibited by the law. By
referring to the constitutional documents of the company that are Memorandum of Association
and Articles of Association it can be easily found that who are the “Directing Mind and Will of
the Company”.
In many cases a company can be held Vicariously Liable for the criminal acts which has
been committed by its employees. Before charging any corporation with the criminal liability it
must be considered by the prosecuting authority that “the evidence available is sufficient for
the conviction” and “prosecution of that corporation will be in the interest of the general
public”. While punishing the corporation the nature of the offence committed must be
determined. If the offence committed by the corporation is more serious in nature its prosecution
will be more inclined towards the public interest. It is not a matter of fact that how much illegal
gains were achieved. The thing which should be taken into consideration is that how the
stakeholders and the employees got affected by this act of the company (Lederman, 2016).
In the facts given both the actus reus and mens rea are present. By referring the
constitutional documents of the company it was found that the directors are the directing mind
and will of the company. Here the company can be made as principal offender. By overstating
the profit of the company it has negatively impacted the stakeholders. Due to this act of the
company the interest of the stakeholders has also been decreased. The company has also
violated the various laws which will be discussed further in this essay. Also there are sufficient
evidences available to held the Rainbow Ltd as criminally liable such as “Misappropriated
Accounts”, “Lack of safety and Health Measures for employees” and “Suspicious conduct of the

Chairman” etc . These criminal acts of the corporation has affected the stakeholders in a negative
manner. The prosecution of the company for the above mentioned criminal acts will be
considered for the interest of public. (Lord, Wingerde and Campbell, 2018).
Types of Corporate Crimes in United Kingdom and Various Governing Legislations
The corporate crimes are happening in whole over the world and United Kingdom is not
an exception for this. Different examples of these corporate crimes are Corruption Cases, Cases
related to Bribery, Fraud, Money Laundering Issues, Offences Related to Tax Evasion and
Failing to Protect the Environment. When a company commits a crime the punishment which
can be given to the corporation is that to impose the fines because company is an artificial person
or court can order the corporation to proceed for the compulsory winding up. (Marmo, and
Chazal, 2016). The company can be vicariously liable for the acts of its employees but it must be
proved that it was done in the course of their employment. For instance,if Mr X has done an
offence which is related to the money laundering with the client then in that case the company
can be held criminally liable. The various types of corporate crimes are discussed as following
with their governing legislations:
Corporate Fraud
It is the most common crime which generally take place by the corporations. This fraud is
done by falsifying the accounts of a company to cheat its investors. The main reason behind this
is to deceive the people about the actual financial conditions of the company. The other reason
for this is that by showing false accounts to the public, it will lead to attract more people which
will eventually increase the investment of the company. These type of corporate offences
generally includes manipulating the accounts, showing the ambiguous price of the share and
showing that the financial condition of the company is in a very good position even though the
reality is somewhat different (McKie, Stretesky and Long, 2015).
These frauds are done to increase the profit and to get the wrongful gains. A monetary
gain without having the legal right to that gain are forbidden by the law in United Kingdom as
these gains are illegal in nature. The governing legislation regarding committing of the fraud by
the corporate bodies is The Fraud Act 2006. This act states that if the corporation is found doing
business in a fraudulent manner the people who are responsible for that fraudulent act can be
given the imprisonment of up to 15 years or fine or both. The Section 12 of this act states that
if the fraudulent act has been committed by the corporations through “Consent or Connivance”

of any director or official of the company the person as well as the company will be held liable
for the fraud.
Bribery
Bribery can be defined as giving or taking money for the purpose to gain certain benefit
for which a person is not legally entitled. The governing legislation for this offence of bribery is
Bribery Act 2010. Section 11 of this act prescribes about the penalty for the corporations as
well as the individuals involved in it . As per this law if any company is found that it has failed in
preventing the bribery the fine imposed can be unlimited (Miller and Justice, 2017). However,
the prosecuted organisation can be a matter of confiscation under the Proceeds of Crime Act
2002. Also if the director of the company gets convicted of the offence of the bribery, it may be
get disqualified from his post under the Company Directors Disqualification Act 1986.
Tax Evasion
In UK many a times the situation arises when the corporations try to evade the taxes. To
deal with this,Parliament of United Kingdom has passed Criminal Finances Act 2017 which has
made it a criminal offence if a business entity or a corporation fails to prevent its employees or
any other person working with it from facilitating tax evasion. In this act two separate
Corporate Criminal Offences were formed. The main reason of including these offences in this
act is to minimise the possibility of evading tax by the employees of the company . It is also the
duty of the upper management and the owners of the business to make sure that all its employees
and workers are working in such a way so that the risk of exposure to Corporate Criminal
Offences are decreased. Due to passing of this new legislation a business entity is required to
follow all the compliances given in the act. Also the businesses should be more aware while
conducting the due diligence and also giving proper attention on the monetary transactions of the
company that how all the payments are being made (Nana, 2020).
The two Corporate Crime Offences which are introduced through this act are applicable
to the company as well as Limited Liability Partnership. If it is proved that the violation of the
provisions of this act has been done by any of its employees, the company will be held
vicariously liable for the offence committed even though the directors and owners of the
company were not aware or involved in the tax evasion. While making any corporation or LLP
liable under this act the two conditions must be fulfilled that are: “a criminal tax evasion has
been taken place and it is not just the tax avoidance” and “the employee or the associated

person of the company is criminally responsible for the tax evasion while discharging its
functions towards the company”. The act defines associated person as any agent or employee
or any other person who acts on the behalf of the corporation. For instance, all the suppliers and
intermediaries can be considered as the associated persons of the company. It is a major
requirement to make the company liable under this act that the employee or the associated person
should work on the behalf of the corporation and not under the personal capacity (Olson, 2015).
Even though an employee has evaded the tax on the behalf of company there is one
defence available that the company has taken the reasonable prevention procedures to ensure that
these preventions will prevent the tax evasion. There are certain guidelines which has been given
by the HM Revenue & Customs that should be followed to take the defence for the criminal
liability for tax evasion. It can be said that these guidelines by HMRC has been issued so that to
ensure that the company has assessed all the possible risks and filled all the gaps and the
loopholes to prevent the employees and intermediaries in facilitating tax evasion.
It must be noted that these Corporate Criminal Offences will be applicable if there is the
tax evasion and not tax avoidance. Here the intention plays a major role. In the tax evasion a
person must act fraudulently and involve a dishonest intention while paying the amount of tax. In
the tax evasion the person knows that they are having the liability to pay tax to the authorities but
they chose to not to pay the outstanding amount. Not only in UK but also in majority of the
countries tax evasion has been considered as the offence (Steinberg, 2016).
It must be understood that for what purpose these Corporate Criminal Offences were
introduced in the given act and what all are the consequences of this act. The main aim was that
the corporation or any other business organisation(LLP) should not remain ignorant about its
employees and suppliers whether these people are following all the taxation laws and regulation
or not.
If these offences were not included in the act there would be a possibility that the company after
knowing about the tax evasion also will remain keep quiet. This act has helped the HMRC to
keep checks and balances upon the company because tax evasion will lead to imposing of fine in
an unlimited amount and no company will want to pay such a fine (Struebing, 2018). Also
committing these types of offences mentioned under the act for the tax evasion will hamper the
image and reputation of the company. If any company found guilty for evading tax it will

become very difficult for that company to get government tenders not only in UK but also
around the globe. This is the reason why the corporations cannot afford to face a CCO.
Corporate Manslaughter and Corporation Homicide Act 2007
It is passed to give more clearance about the criminal liabilities of the company where the
fatality has been happened because of the failures regarding the health and safety of its
employees and other visitors. Here it must be noted that the company will be held liable if the
person has been died because of the lack of health and safety measures in the company.
Offences Mentioned Under Companies Act 2006
There are also various corporate offences which has been enumerated under the
Companies Act 2006. Fraudulent Trading is an offence which has been given under Section
993 of the act which states that if a company or corporation is carrying a business with intention
to defraud its creditors will be liable for an imprisonment of up to 10 years or a fine or with
both. Also here under this offence the court can order the dismissal of the directors of the
company and may also disqualify the directors from being a director up to 15 years.
As per Section 387 of the Companies Act 2006, the offence of Failing to maintain the
records of the accounts by the company has been given. The prescribed punishment for this
offence is imprisonment of up to two years or fine or both.
Also the offence under Section 418 comes into picture when the false information is
being provided to the auditor of the company. If any person furnishes any false information to
the auditor in that case maximum imprisonment of 2 years can be awarded with fine or both.
Deferred Prosecution Agreements and How these Agreements Got Implemented
In United Kingdom DPA is an agreement which is made between the prosecuting
authority and the corporation under the supervision of a judge which allows that the punishment
awarded can be suspended or postponed for a specified period of time if the corporation follows
certain conditions mentioned under the agreement. These Deferred Prosecution Agreements are
made so that the company can rectify their mistakes by imposing a certain amount of fine upon
the company. These DPAs should be made under the supervision of the presiding judge who will
ensure that the terms of this agreement are fair and reasonable and the agreement is ensuring the
interest of justice. Under the Schedule 17 of Crime and Courts Act 2013, Deferred Prosecution
Agreements were introduced for the purpose to avoid the legal proceedings which are lengthy in
nature and also very costly (Thomas, 2019). There are various cases of corporate crimes in

United Kingdom where Deferred Prosecution agreements were made such as Standard Bank
Case in the year 2015, in the case of Tesco where the over profits were showed and fine was
imposed in the year 2017. The recent cases where DPA was made was in the case of Airbus
SE(2020) & in the case of G4S Care & Justice Services(UK)Ltd.
Application of the Above Mentioned Laws on the Given Facts and their Consequences
The Rainbow Ltd has committed various offences. It has violated various laws which
shows that there was a failure of corporate governance in the Rainbow Ltd. The first offence
which has been committed by the company is the violation of the provisions of The Fraud Act
2006. Here the company has done the business fraudulently and is liable under the Section 12 of
the act. Also the Company will be liable to punished under the Criminal Finance Act 2017 as in
the investigation it has been proved that the company was evading the tax since a year. The
Rainbow Limited has not taken the proper precautions regarding the health and safety measures
of its employees. One of the employees while discharging his duties has been died due to the
ignorant behaviour of the company towards the safety of its employees, hence the Rainbow
Limited will be held liable under the Corporate Manslaughter and Corporation Homicide
Act 2007.
Here the consequences of all these offences will be that the directors and all the other
officers of the upper management may be disqualified for the misconduct done by them. Also it
is clear from the facts given that the chairman of the company Mr John was directly involved in
these corporate crimes and separate trial for fraud and money laundering can be started against
him. Also company has failed to prove that they have followed the guidelines issued by the
HMRC to avoid the tax evasion so the company will also be liable for the Corporate Criminal
Offences and the company will be awarded with the unlimited fine. The Prosecuting authority
here can go for a DPA to suspend the punishment after agreeing to certain terms of the
agreement and paying the amount of fine mentioned in the agreement.
The victims and stakeholders will lose their interest in the market because of these crimes
which has been committed by Rainbow Limited. They have option to file a case against the
company for fraud under the Companies Act 2006 and various other laws discussed above.

CONCLUSION
By doing the above research and applying various laws the conclusion is that legislature
passed certain legislations to overcome the problem of corporate crimes. It is seen by the above
study that the people who are more educated are indulging in such types of crime by using the
loopholes. As corporation is an artificial personality it cannot be imprisoned. What the court can
do is that either impose fine upon the company or pass an order to end the life of the company. It
is also the duty of the Parliament to make the laws in such a way so that there should not be the
scope of misusing them. By doing the above study the researcher has come to a conclusion that
persons who are entrusted for carrying out the activities of the company are doing such crimes
for their personal financial benefits. It is the duty of the government to keep check and balances
on such persons. The punishment awarded to these people should be deterrent in nature so that
these types of crimes does not happen in the future.
REFERENCES
Books & Journals
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Marmo, M. and Chazal, N., 2016. Transnational Crime and Criminal Justice. sage.

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