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24 June 2013

Legal entities now subject to criminal liability


Author: Oleksandr Yakovenko, Andriy Pozhidayev, Anna Tkachova
Source: International Law Office. – 2013. – 24 June

Introduction

In the course of implementing the visa liberalisation regime with the European Union, Parliament recently passed several anti-corruption laws, including the Law on Criminal Liability of Legal Entities. The law introduced amendments to the Criminal Code, the Code of Criminal Procedure, the Law on Principles of Prevention and Combating Corruption and the Law on Ensuring the Safety of Those Involved in Criminal Proceedings.

Upon the president's signature, the law will enter into force on September 1 2014.

The law aims to ensure the implementation of recommendations of the Group of States against Corruption and the Committee of Experts on the Evaluation of Anti-money Laundering Measures and the Financing of Terrorism, as well as the implementation of a number of international treaties to which Ukraine is party.

Scope of law

The law criminalises the following deeds committed by managers, owners, participants or other authorised representatives of a legal entity on its behalf or in its interests:

• money laundering (ie, the legalisation of criminally obtained income and other property);

• acts of terrorism, involvement in a terrorist act, public incitement to commit a terrorist act, creation of terrorist groups or organisations, facilitation of a terrorist act and the financing of terrorism;

• use of proceeds from trafficking narcotics, psychotropic substances, their analogues and precursors;

• offering or giving unlawful profit to officials of state or municipal authorities (ie, a 'bribe' under the previous terminology) and the subsequent acceptance of such an offer by the officials; and

• exercising undue influence on the officials of state or municipal authorities.

Two main pre-requisites exist for the criminal liability of legal entities:

• Given that the legal entity operates through individuals and taking into account that a criminal offence a priori can be committed only by individuals, an individual that commits any of the above-mentioned offences must be a representative of the legal entity and act on its behalf.

• The criminal offence must be committed in the interests of the legal entity.

With regard to the first criterion, Ukrainian court practice is extensive and unanimous; however, it is yet to be established with respect to the second pre-requisite.

Applicable entities

According to the law, legal entities that may be subject to criminal liability include enterprises, institutions or organisations. This excludes:

• state authorities;

• local government authorities;

• organisations established by such authorities in prescribed order that are financed through state or municipal budgets;

• obligatory state social insurance funds;

• the Individual Deposit Guarantee Fund; and

• international organisations.

Penalties

The law provides for three types of criminal punishment:

• fines;

• forfeiture (confiscation) of property; and

• liquidation (winding-up) of the legal entity.

Fines are the primary form of punishment and can range from approximately $10,000 to $160,000, depending on the seriousness of the offence.

The forfeiture (confiscation) of property and liquidation (winding-up) of the legal entity are additional types of punishment and are imposed for terrorism-related crimes.

Analysis of the law reveals that several provisions of the criminal legislation will require further amendments:

• the provision regarding the territorial and personal application of the law;

• the provision specifying the application of the law to Ukrainian and/or foreign legal entities; and

• the provision guaranteeing the right to defence, since the law does not foresee the notification of a legal entity on suspicion and/or issuance of a separate bill of indictment.

Therefore, clarifications on the procedural status of legal entities in criminal proceedings, as well as sufficient guarantees of a just trial, are to be incorporated into the law.



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