Do not forget to set up an effective and functional Compliance Management System in time

21. September 2016

On December 1, 2016, an amendment to Act no. 418/2011 Coll. providing for the criminal liability of legal entities and for the proceedings held against them comes into effect. The amendment brings a principal expansion of the scope of criminal liability of legal entities. Legal entities will be now criminally liable for all offenses provided for in a separate part of the Criminal Act, excluding those offenses which a legal entity cannot perpetrate by definition (e.g. manslaughter or brawl). However, it will be newly possible for a legal entity to release itself from criminal liability. If a company proves in prospective criminal proceedings that it has made all reasonable effort to effectively prevent the perpetration of a wrongful act on the part of its employees, statutory, managing or auditing bodies or any other senior employees, such company will be able to exonerate itself.

An effective and functional Compliance Management System will thus gain importance as it will define the ethical and legal rules of conduct within a company and for all corporate processes and acts, as well as for commercial relations. However, the very existence of the aforesaid system or any other similar internal guidelines will not safeguard the company’s exoneration. In the proceedings concerning legal entity’s liability, it is examined in detail at all times whether or not the company actually did take all reasonable effort as to prevent the perpetration of a criminal offence. It often happens that Czech branches of international corporations rely on the assumption of their parent company’s program, which is not always sufficient for this particular course of action.

The Act providing for the criminal liability of legal entities and for the proceedings held against them has been in force since 2012; there are currently tens of criminal proceedings against corporations pending. It is important to realize though that a legal entity is still criminally liable despite the fact that the actual perpetrator has not been found.

Are you not sure about the quality of your Compliance Management System? Or you may not even have one set up as yet? Please contact us – we will be happy to perform a due diligence of your Compliance Management System or, should you wish so, we will help you to set up a functional system for you.