Analyse the principles Governing liability for corporate actions

and the rationale for corporate criminal liability

Sheriffdeen Idowu

ABSTRACT

1
For as long as corporations have existed, individuals have used the corporate form to achieve
illegal ends1. In order to meet this problem, courts and lawmakers have had to answer several
questions: Should the person responsible be punished or should the corporation itself be
punished? Should both be punished? If the corporation is to be punished, what sanctions should
be imposed? These questions pose difficult philosophical problems for the criminal law because
a decision to prosecute a corporation may involve punishing some people who have no mens
rea2. Yet it also seems unfair to allow a corporation engaging in illegal conduct to escape all
punishment. This paper examines the principles governing liability for corporate actions and the
rationale for corporate criminal liability.

INTRODUCTION

1
Bruce Coleman; Is Corporate Criminal Liability Really Necessary? 29 Sw L.J 908(1975)
2
J. HALL, GENERAL PRINCIPLES OF CRIMINAL Law 280 (1947)

2
Corporate personality and imposition of corporate criminal liability have given a great unease in
the field of Criminal Law3. In the past, it was inconceivable that a corporation could be held
liable4. The argument generally advanced was that a corporation as an artificial person, has no
physical existence and could therefore not be subjected to the prescribed penalties attached to
offences5. Alongside this thinking, there were also those who felt that a corporation has all the
attributes of a natural person and should therefore be capable of receiving all the punishments
attached to all offences including physical punishment. Under the Common law, corporations are
criminally liable subject to certain limitations such as assault, manslaughter, murder, and rape.
This position makes it possible to hold a corporation criminally liable for failure to perform its
obligations under the Common Law and this was later extended to cover misfeasance. In this
respect, no mental state was required and the penalty which was practicable then was a fine
which a corporation could easily be made to pay6. Presently, in offences that require the proof of
mens rea, corporations are easily made liable by imputing the state of the mind of e.g. the
directors who are the alter ego and directing mind of the corporation. In other instances,
corporations have been vicariously and criminally held liable for the acts of such junior
employees as drivers, clerks or cashiers. This is done through either the law of agency or labour
law which makes the principal liable for the act of its agent and the master liable for the act of its
servant7. The Nigerian Legal system which is fashioned along the same system as the English
legal system accommodates the position at Common law to the effect that corporations could be
criminally held liable but not for all offences. Although corporate criminal liability has been
accepted in many jurisdictions, the legal basis for its application varies from jurisdiction to
jurisdiction. In Nigeria, laws that regulate the activities and duties of corporations specify
various penalties for infraction and impose strict liability on such companies. Thus, a company
may be penalized for failing to render a return, perform an activity or for participating in a
prohibited activity8.

3
Mueller, G.O.W. (1957). Mens Rea and Corporation. University of Pittsburgh Law Review 19(21), 38-40.

4
Emem, C.E. and Uche, P. (2012). A New Dawn of Corporate Criminal Liability Law in the United Kingdom:
Lessons for Nigeria, African Journal of Law and Criminology, 2(1),
5
Amao, O.O. (2008). Corporate Social Responsibility, Multinational Corporations and the Law in Nigeria: Controlling the
Multinational in Host States. Journal of African Law, 52.
6
Slapper, G. (2010). Corporate Punishment. Journal of Criminal Law, 73(4), 181-184.
7
Ibid
8
Chinedu Ozor; Corporate Criminal Liability-Implication for Business In Nigeria

3
 CORPORATE CRIMINAL LIABILITY

Corporate criminal liability or corporate crime is very difficult to define because this phrase
in present day scenario covers wide range of offences. However for understanding purpose it
can be defined as illegal act of omission or commission, punishable by criminal sanction
committed by an individual or a group of individuals in course of their occupation 9. Corporate
criminal liability arises when there is a breach of a certain statutory provision by a company.
Today, a corporation is an artificial entity that the law treats as having its own legal personality,
separate from and independent of the persons who make up the corporation. As it was held in the
familiar case of Salmon v. Salmon 10 This means, for example, that a corporation can own and
sell property, sue or be sued, or commit a criminal offence because; a corporation is made up of
and run by people, acting as agents of the corporation. The corporations are run by natural
persons and these peoples’ actions can be criminal in nature and can sometimes even result in
great economical as well as human loss to the society.

In certain jurisdictions, corporations are held to be criminally liable for corporate killings and are
charged for offences such as manslaughter or murder11. In the United States, the Supreme Court
in 1909 in New York Central & Hudson River Railroad v United States 12made the decision that
the corporation was criminally liable because of the benefit the company derived from the
deviant acts of its agent. In that case the theory of vicarious liability was introduced into criminal
law. The American courts apply the theory extensively. In India too, the Supreme Court ruled in
Standard Chartered Bank v Directorate of Enforcement that corporations can be prosecuted and
asked to pay a fine, notwithstanding the provisions of the law that was contravened13. The term
'corporate criminal liability' has always provoked numerous deliberations and commentaries
from legal academics in the United Kingdom. These reactions have gradually evolved from
denying corporate criminal liability in the early 1800s to now acknowledging that the actions of
corporations are as powerful as an individual's, if not more. While here in Nigeria there are yet
9
C. Reasons: Crime Against The Environment: Some Theoretical And Practical Concerns. Crim. L.Q.
Vol. 34 Nov. 1 (1991) See also R. Krame. '‘Corporate Criminality: The Development of An Idea’: In
E. Hochstedler, ed. Corporate as Criminals. (Beverly Hills. Sage Publication 1984).
10
(1897) AC 22
11
An Analysis of Corporate Criminal liability in Nigeria; Veronica Ngozi, Ekundayo Orisakwe , Olalekan Moyosore Lalude.
12
[2011] 15 SCC 144
13
See Rishima Rawat, 'Criminal Liability of Corporations in Various Jurisdictions' (Academia.edu)

4
no known cases of corporations being charged for the offences of manslaughter or murder, it is
clear that there are certain offences for which a corporation cannot be charged because of the
difficulty in holding such corporations liable and making it to undergo the prescribed
punishment14.

THE RATIONALE FOR CORPORATE CRIMINAL LIABILITY

It is trite that the purpose of law overtime has been to establish a process of social engineering
that
will shape the various individuals in the society into law-abiding persons 15. This was to be
achieved
by regulating the standard of behavior expected amongst the various individuals of the State in
their interrelationship with one another as well as in their conduct with administrative and
statutory authorities. Persons who were noted to have breached these standards of behaviour
were
made to face the law and were eventually made to subscribe to the consequences of their actions
whether good or bad16. A company is a construct of the law, it is a juridical person therefore it
can be held liable for crimes committed by it through its agents. Presently, in offences that
require the proof of mens rea, corporations are easily made liable by imputing the state of the
mind of e.g. the directors who are the alter ego and directing mind of the corporation17. Today
when the components of the acts done by a company are broken down to understand what the
company is doing, in many cases mens rea is evidently involved and the principles of criminality
can be easily associated with these acts. Issues like intent: specific or general, the circumstantial
proofs, the confessions of workers etc. may be clearly present to demonstrate the acts or
omissions done by the corporate in furtherance of its actions. The basic contention is the fact that
the world is divided over the implications of these acts.

The term corporate liability means the responsibility of a corporate entity for its acts or omission
that occasion a breach of the provisions of criminal law or generally, an abuse of laid down
14
Ibid
15
V S Khanna, 'Corporate Criminal Liability: What Purpose Does it Serve?' (1996) 109 HLR 7
16
R v Birmingham & Gloucester Railway Co [1842] 3 QB 223.
17
Erhaze and Momodu (n 7) 63-72.

5
statutory provisions for which civil sanctions or criminal penalties are attributable. The term
'corporate' is defined as relating to, or involving a corporation, especially a business corporation.
In addition, the term liability is defined as the quality, state, or condition of
being legally obligated or accountable; legal responsibility to another or to society, enforceable
by
civil remedy or criminal punishment18. In New York Central and Hudson River Railroad and
Company v United States, the US Supreme court clearly understood the impracticability of
ascribing human attributes such as 'state of mind' to a juristic person and came up with an
ingenious reliance on the doctrine of Respondeat Superior to isolate those that represent the
company and
ascribe their actions to the company itself; this invariably relied on human acts to determine
culpability of companies19. Also in the United Kingdom in Leanard's Carrying Company v
Asiatic
Petroleum Company Limited, the court set a similar parameter to look beyond the abstract
qualities
of the company and review the activities of its 'directing minds' who are influential enough to be
referred to as its 'alter ego20. On a global scale, corporate criminal liability has been addressed in
the United Nations Convention against Transnational Organized Crime.

CORPORATE CRIMINAL LIABILITY IN NIGERIA.

In Nigeria, the key statutes that sets out crimes in Nigeria, such as the Criminal Code makes no
special provisions concerning the criminal liability of companies (as distinct from the individual
liability of members comprising the company). However, the liability of a corporation under
criminal law is provided in various Nigerian legislation such as the Companies and Allied
Matters Act, The Investment and Securities Act and in the regulatory filings of the Security and
Exchange Commission. These laws are however impotent when it comes to prosecuting artificial
persons in Nigeria.

Looking at the decisions of superior courts in Nigeria, it is evident that a company can be
prosecuted for crimes either alone or alongside their agents, officers and directors. In Abacha v
18
Dan K Webb, 'Review of Corporate Criminal Liability by Kathleen F Brickey' (1986) 41(3)
19
Mohammed Suleh-Yusuf, 'Criminal liability of Corporate Persons in Nigeria' (2017) 3(4) IJL32-38.
20
ibid

6
Attorney General of the Federation21, when the when the court was called upon to determine
whether a company can be prosecuted for a crime, the court emphatically held that a company
can be prosecuted as if it is a natural person. Corporate mens rea is said to include corporate
intent,
knowledge and recklessness22.

It is noteworthy that under the Nigerian criminal code, the interpretation section defines an
offence as 'an act or omission which renders the person doing the act or making the omission
liable to
punishment under any Act or Law23. Furthermore, both the criminal Code and the Penal Code
included corporations in the definition of persons. In a similar vein, the Interpretation Act also
provides that a person includes persons corporate or unincorporated24. It can thus be deduced that
companies in Nigeria can be held liable and prosecuted for criminal offences occasioned by its
agents.

In R v ZIK Press25, a corporation was found guilty of the offence of contravening section 51
(1) (c) of the Nigerian criminal code. Furthermore, the effects of the provisions of Section 311
(2)(c), 314, 315, 316 and 322 of the companies and Allied Matters Act26 show that in certain
instances under the right circumstances a criminal action can be competently instituted against a
company and its directors by the Attorney General of the Federation upon the findings of the
inspectors of the Corporate Affairs Commission wherein a criminal recommendation may have
been suggested based on the evidence evinced by the Inspectors report.

Also, another important legislation in this respect is the Administration of Criminal Justice Act,
2015. A combined reading of sections 477 and 484 suggests that, a corporation can be tried for
criminal offences through its representatives.

21
Abacha v Attorney General of the Federation [2014] 18 NWLR (part 1438) 21.
22
VS Khanna, 'Corporate Mens Rea: A Legal Construct in Search of a Rationale' (1996) Harvard Law
School Discussion Paper No 200 <http://www.law.harvard.edu/programs/olin_center/papers/pdf/
Khanna_200.pdf> accessed 9August 2019.
23
Criminal Code Act LFN 2010, Cap C38.
24
Ibid
25
R v ZIK Press [1947] 12 WACA 202
26
Companies and Allied Matters Act 2020 Cap C20 LFN 2004.

7
Also, In Aderemi v Lan and Baker Nigeria Ltd27, Aderemi JCA stated that by recognizing the
separate personality of the company, the law has drawn a veil of incorporation and he opined that
'it is now settled law that the directors or managers are those whose decisions can be attributed to
the legal fiction'. He concluded that 'there is nothing sacrosanct about the veil of incorporation'.
He further asserted that the court must be ready and willing to open the veil of incorporation to
see the characters behind it, if justice must be seen to be done.

Presently, in offences that require the proof of mens rea, corporations are easily made liable by
imputing the state of the mind of e.g. the directors who are the alter ego and directing mind of
the
corporation. In other instances, corporations have been vicariously and criminally held liable for
the acts of such junior employees as drivers, clerks or cashiers. This is done through either the
law of agency or labour law which makes the principal liable for the act of its agent and the
master liable for the act of its servant as it was held in PFS Ltd v Jefia28.

In order to establish Corporate actus reus, it is posited that the actus reus of corporate misconduct
should be some kind of organizational conduct as opposed to individual conduct29. In R v
Attorneys for Anglo-Nigeria Tin Mines Ltd30. In that case, an offence created by the Minerals
Ordinance was in issue. Berkley J stated that, at common law, it is impossible to charge a firm as
having committed offences. He stated further that there should be an individual who will be
liable for the offence committed. He admitted that in modern times, certain statutes have come in
force, which render corporate bodies liable to penalties in certain event. He concluded that this
was true after studying the provisions of the Ordinance and its amendments.40 This case set the
precedent for subsequent cases on the same subject matter pointing out that corporations as well
can be held to be criminally liable.

CONCLUSION

27
Aderemi v Lan and Baker Nigeria Ltd [2000] 7 NWLR (part 663) 51.
28
PFS Ltd v Jefia [1998] 3 NWLR (part 543) 60.
29
A Eseni Udu, 'Exposition of the Concept of Lifting the Veil of Incorporation for Improved Corporate
Management in Developing Countries: The Nigerian Perspective' (2018) 71 JLPG 9.
30
R v Attorneys for Anglo-Nigeria Tin Mines Ltd [1926] 10 NLR 69.

8
Corporate criminal liability has progressed from the time when it was inconceivable to hold a
corporation criminally responsible to the present time, where corporate criminal liability is an
accepted fact. If a corporate agent commits a crime while acting under the scope of his authority
and with the intent to benefit the corporation, then the corporation will usually be held
criminally responsible for these acts.

In Nigerian, the introduction of criminal sanctions and punishment on

corporations is vital and useful. Although, the criminal and penal code should have a clear
law in place for corporate criminal liability. While, persons: in the criminal code
should be expressly stated to include companies, as this has not been interpreted
clearly.

9
10