Acquittal of a legal entity from criminal liability on the grounds of low organisational complexity

Recently, the Supreme Court has acquitted a legal entity of the offences for which it had been under investigation, on the grounds that it was not sufficiently complex to be guilty of such offences. To this effect, the High Court affirms that not all legal entities are imputable for the purposes of article 31 bis of the Spanish Criminal Code. 

Specifically, Ruling 894/2022, of 11 November, upholds the appeal lodged against Ruling 525/2020 of the Lugo Provincial Court, which convicted the legal entity and one of its administrators of fraud.

Firstly, the Court alleges that the natural persons under investigation were called to testify, but not the legal entity, and therefore understands that the latter was not formally charged in the investigation phase

Likewise, the High Court points out that, in accordance with article 783.1 Spanish Criminal Procedure Act (hereinafter, LECrim), the legal entity should have been dismissed without charge, insofar as neither the complaint filed nor the proceedings carried out provided any indication of the existence of a corporate crime. In this respect, according to the ruling, it is not sufficient to accuse the legal entity of the crime, since, as with natural persons, the perpetration of the corporate crime by the legal entity must be indicated.

On the other hand, the Court considers that the legal representative of the legal entity investigated in the proceedings should not have been one of the natural persons accused, and finally convicted, as this could generate a conflict of interest and undermines article 409 bis LECrim. 

Finally, the Supreme Court addresses the possible criminal liability of the legal entity for the facts investigated. In this respect, it states that the basis of corporate criminal liability is based on a defect in the organisation of the legal entity that facilitates the commission of criminal acts within it. For such an organisational defect to exist, the legal entity must have a certain degree of complexity.

In particular, it states that “the criminal liability of the legal entity revolves around organisational complexity, in such a way that it will be possible to speak of imputability with respect to those that present a certain degree of complexity, with the consequence that not all legal entities will be imputable”.

The Judgment cites other pronouncements of the Supreme Court on the need for imputable legal entities to have a certain degree of complexity. For example, Judgment 154/2016, of 29 February, which studies the imputability of shell companies, and Judgment 747/2022, of 27 July, on sole proprietorships.

In the specific case under study in the Judgment In the specific case under study in the Judgment analysed, the Court alleges that it is a company of such minimal complexity that it was difficult to distinguish the partner from the company itself. In this context, it states that “the reason for this differentiated treatment of liability does not lie so much in whether they are single-member legal entities or not, but in criteria of complexity and internal organisational structure (which can exist in single-member companies), since, in the absence of this complexity, it would not even be possible to assess the culpability that would derive from the breach of duties of supervision and control, which, as we have said, are consumed in the criminal dynamic itself, If, as we have said, these are consumed in the very criminal dynamics of the offending administrator, it will be sufficient for the latter to be convicted, and the legal entity will be acquitted because it will be considered unimpeachable, since it cannot be considered that the element of culpability is present in it, insofar as it is incompatible with its nature to speak of internal control mechanisms and, consequently, of a culture of respect for the rule, on the basis of which its capacity for culpability resides.

What is decisive is the existence of an internal complexity, presumable on the basis of a sufficient material organisational substratum, which, if it is lacking, is the presupposition for speaking of criminal imputability, due to the non-existence of the capacity for guilt, since, due to its minimal structure, there is no basis from which to form it, and the fact is that, not having the possibility of establishing control mechanisms, the basis of its responsibility cannot arise, hence not every society can be considered criminally imputable“.

Consequently, the legal entity is acquitted on the grounds that its internal structure is not sufficiently complex to endow it with its own relevance, without prejudice to the civil liability that may derive from it. 

This line of argument follows that contained in Supreme Court Ruling 264/2022 of 18 March, which rejects the possibility of holding criminally liable a company with a single partner and administrator, whose assets are confused and diluted with those of the legal entity, on the understanding that it lacks sufficient organisational development to differentiate it from the natural person. See an article on this Judgment in the following link.

The court Judgment is available here.

Compliance Department of Molins Defensa Penal.

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