THE CRIMINAL LIABILITY OF CORPORATIONS

THE CRIMINAL LIABILITY OF CORPORATIONS

Abstract:

This is an attempt to look at the corporations liability for its own acts and those of Its organs or agents and servants. The purpose, then, is to look into the criminal liabilities of Companies for such things as breach of statutory duties, such as failure to make returns and to keep books of accounts or to hold annual general meetings and fraudulent acts such as tax evasion, fraud and other crimes;e.g. deceit and conspiracy. To that extent, therefore, the issues of vicarious liability, liability in tort and contract for those actions or omissions of the corporation’s agents or officers would be examined in passing. This area of the law has been chosen for study because corporations, be it public or private, occupy an important segment in the economic and industrial life of a country and should, therefore, be of much interest to company lawyers in particular and the private business enterpreneurs, the general public and Government alike. Companies (including statutory corporations) are the conerstone of any country’s industrial and economic growth and, therefore, have a vital role to play in a developing economy like Nigeria where the need for a strong industrial base is manisfestly desirable. The role of companies, therefore, cannot be over emphasized. The resultant effect of their importance is in the overwhelming -iidesire of business enterpreneurs investing their capital in company shares, partnerships and other business concerns thereby creating new avenue for the diversification and investment of capital as against the traditional, unprofitable method of keeping hard currency at home, which is to a very large extent a relic of the past. Since the formation and promotion of companies have become an important avenue of investment in our developing economy it is necessary and pertinent for the avoidance of social friction to examine those acts and omissions for which a company could be held liable criminally or civilly. Through this study it is hoped, there will be a renewed public awareness and confidence in the particular business concern citizens are investing in, as well as providing them the opportunity of knowing what duties companies owe private citizens who have shares in them and other corporate bodies outside their own. With this knowledge at the back of their mind, the activities of company executives will be regulated. Indeed they are presumed to be aware of the extent of their civil and criminal liabilities. Against this background, an attempt has been made by legislation to actually regulate the activities of companies for the benefit of the public and also to ensure a successful development of the country economically and industrially. For instance, the – iii – Nigerian Indigenisation Act has imposed certain limitation on the powers of the management. The Companies Act 1968 also provides for such things as disclosure of accounts, making annual returns, issuance of prospectus or statements in lieu and other requirements. The Banking Act of 1969 also provides in section 11 A(1) that: “No manager or other official of the licensed bank shall in any way, either directly or indirectly be interested in any advance, loan or credit facilities and if so interested should inform the Bank.” The essence of this legislation is to place a total prohibition on directors and management of Banks from withdrawing money from their banks, a contravention of which will lead to a fine of Ten thousand Naira (N10,000) or three years imprisonment and forfeiture of any resulting gains or benefits. But in almost all the banks and corporations in Nigeria the Directors and management allocate to themselves loan and credits from their corporations before anyone else. Is that not a contravention of the law? This thesis is an attempt, therefore, to look at the extent of the liabilities of corporate organisations, their agents and principal officers and servants. It is hoped that the thesis will throw more light on many latent issues such as the liabilities of corporation while acting through their human agents on the one hand, the criminal and civil remedies available to the individuals and similar bodies of a corporate nature on the other. It is an inescapable fact that many shareholders do not know their rights and remedies and thus show little or no interest in the affairs of their company except to receive dividends whenever they are due. Hardly ever are shareholders aware that they have a stake in the running of the company, or let alone, permitted to know such things as the civil and criminal liabilities of their companies. An apt – illustration of the situation is section 7 (2) of Decree No.20 of 1984. which provides for the winding up of any company which contravenes any law or regulations. A number of companies had to face the penalty of paying heavy fines for actions contrary to the Decree or breach of other statutory regulations. This is to reflect the growing concern of government (both State and Federal), in our industrial, commercial and social life. Finally, it will be the concern of this paper to examine the criminal liability of companies in situations where they fail to make annual returns to the Registrar of Companies and to make true profit declarations for the purposes of tax assessment to the revenue Commissioner. The issue whether such reliefs will be awarded through the application of Statutory powers vested in the Commissioner of Inland Revenue or through the institution of criminal prosecution in a court of law will also be a major thrust of this thesis. It is trite knowledge though that many a writer have expressed support for the idea of a non-criminal approach to penalizing corporations for such statutory of fences. Whether or not their views are acceptable in the Nigerian context is one of areas of concern of this thesis. Because the purpose of company law is to prevent fraud and mismanagement the tendency exists in the mind of the reader to regard the principle of corporate personality as being negative or of neutral importance. Functionally corporate personality doctrine is the corner stone of company law. It is for this obvious reason that one cannot but start with the analysis of the origins of the corporate personality in order to know what exactly one is making liable. To be liable there must be duties in respect of which one must have omitted to act or failed to exercise a duty of care. To know the duties if any, which the corporation owes the individuals one must examine the attributes of the corporation and how the doctrine of corporate personality came to be accepted and recognized in Nigerian Company Law. For the purposes of convenience one cannot begin to examine the criminal liability of corporations without first discussing even briefly how the corporation came into being thereby becoming liable for its own acts or those of its officers. Corporate criminal liability is now an accepted principle of Nigerian Criminal and Company Law. For this reason it represents a complete reversal of the original English Common Law rule. It was not until the middle of the 1940’s that corporations were made liable for some specific offences involving mens rea. Corporations were successfully made liable in cases of public nuisance, but they were not made liable for crimes of which mens rea was a necessary ingredient. When liability was finally imposed upon corporations the bases upon which it was imposed and the reasons underlying its imposition were not made apparent. One could suggest that it was due to the increasing advancement of the country commercially, industrially and economically. The acceptance of the concept of the corporation as a separate, distinct legal person, and its appearance as a common mode of business organization forced development in this area of the law. In Britain, U.S.A., Canada and Nigeria corporate criminal liability is an accepted phenomena but in Scottish law corporations are not generally made liable for of fences involving mens rea. In Norway, liability is only imposed in respect of economic crimes. The basic reason for the bar to criminal liability has been that, corporations have no mind capable of entertaining a criminal intent; that they have no capacity to commit crimes and that they cannot be committed to prison. Corporate criminal liability is still at the embryonic stage in Nigeria; hence not much of such cases go to court. But that is not to say that Nigeria does not recognize the criminal liability for corporations. In fact contrary to the case of Decree No.20 of 1984, which provides the punishment of corporation is an inescapable example of this development. For this reason it is hoped that the examination of this subject will be both interesting and important. It is also for this reason that the historical development of corporate personality, its legal consequences and subsequently its attributes will be examined for a clearer appreciation of the subject. Organisational structure. The thesis is divided into 7 main chapters. Chapter 1 which is an introductory chapter deals mainly with the origins and various theories about the corporate personality. This will provide the basic background for a proper understanding of other chapters. It will serves, as an introductory material without which the discussion envisaged is bound to be incomplete. Chapter II – This will deals, with the outcome or consequences of incorporation. It will also examines the various attributes of the corporations. The doctrine of lifting the corporate veil will is also be examined with the aim of laying the proper foundation for the discussion of latter chap-ters. Chapter III – deals with the early development of corporate criminal liability and also the reasons for making corporation criminally liable. Chapter IV – In chapter IV, the relationship between the three essential concepts in corporation law will be looked at viz: The relationship between corporate criminal liability, corporate civil liability and corporate social policy will be examined. Chapter V – will examine the crimes for which the corporation itself would be held liable and those which the officers of the company will be held liable. Chapter VI – deals with the stipulated penalties for non-compliance with the provisions of the companies Act of 1968. Chapter VI – being a concluding chapter examines the future reforms in corporation law

THE CRIMINAL LIABILITY OF CORPORATIONS

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