Criminal Liabilty in Companies in Spain

A new law recently introduced in Spain on the 23rd of December 2010 has brought about a considerable step forward in the creation of greater transparency and responsibility on the part of companies and other legal entities. In this law it has been established that a legal entity (for example a limited liability company) can now be considered to have criminal liability and duly answer for such. This new figure overhauls a tradition of many centuries in which it was considered that only people can be held criminally liable. The new law establishes that legal entities can now be considered criminally liable in the following cases:

1) On their own behalf or in their stead by the directors that represent them

2) Anyone else who on behalf of or depending on the directors of the company has carried out a criminal act in relation to the activities of the company.

The criminal liability of a company does not in any way however exclude the criminal liability of the individuals behind these activities and who ordered them. The figure of criminal liability on the part of the directors or any other legal representatives of the company has existed for some time and covers such areas as fraud, bribery, private bribery (a new figure introduced in the same law), money laundering, criminal liability before the tax or the social security administration, against the environment, town planning or against the rights of workers.

The penalties envisaged in the new law can be serious and go from the complete dissolution of the company or legal entity, the temporary suspension of their activities, the temporary closure of any or all premises in the name of the company, the prohibition to agree contracts with the public administration or indeed judicial intervention as well as financial penalties.

It should be remembered however that companies can avoid being held criminally liable if it is considered that they have exercised a sufficient degree of control (due diligence or corporate compliance). For this reason, since the introduction of the new law, many companies have introduced systems of control and corporate compliance the objective being to avoid any future claims made against them for criminal negligence. These systems which were previously only introduced by larger companies or multinationals are now seeing a wider acceptance on the part of small to medium-sized companies. It is hoped that these new measures will improve consumer confidence in an atmosphere of mistrust of the practices of many corporate bodies.