The Australian Law Reform Commission (ALRC) has released a Discussion Paper, Corporate Criminal Responsibility (DP 87).

The ALRC’s research demonstrates that there is little distinction between the categories of misconduct that currently attract criminal liability and those that attract civil liability. This inconsistency is concerning given that breaches of criminal law are intended to attract serious consequences.

The Report considers the concurrent availability of civil and criminal sanctions for many breaches of the law. There is a concern that this disincentivises criminal prosecution, given the higher standard of proof in criminal trials and the complex evidence that is often required to prove corporate misconduct. This creates the risk that regulators pursue civil remedies in circumstances where criminal convictions may be more appropriate.

The ALRC has made 23 proposals for reform to the Commonwealth’s corporate criminal law regime.

The Discussion Paper addresses a number of aspects of corporate criminal liability, including:

• the principled division between criminal offences and civil penalty provisions;
• the method for attributing criminal liability to corporations;
• individual liability for corporate offences;
• whistleblower protections;
• deferred prosecution agreements;
• penalties and the sentencing process;
• illegal phoenix activity (deliberate liquidation with the intent to avoid creditors and continue operations through a new entity); and
• the implications of the transnational nature of business and extraterritorial offences.

The proposals include

• Commonwealth legislation should be amended to recalibrate the regulation of corporations so that unlawful conduct is divided into three categories (in descending order of seriousness):
  a) criminal offences;
  b) civil penalty proceeding provisions; and
  c) civil penalty notice provisions.
• A contravention of a Commonwealth law by a corporation should only be designated as a criminal offence when:
  a) the contravention by the corporation is deserving of denunciation and condemnation by the community;
  b) the imposition of the stigma that attaches to criminal offending is appropriate;
  c) the deterrent characteristics of a civil penalty are insufficient; and
  d) there is a public interest in pursuing the corporation itself for criminal sanctions.
• A contravention of a Commonwealth law by a corporation that does not meet the requirements for designation as a criminal offence should be designated either:
  a)as a civil penalty proceeding provision when the contravention involves actual misconduct by the corporation (whether by commission or omission) that must be established in court proceedings; or
  b)as a civil penalty notice provision when the contravention is prima facie evident without court proceedings.
• When Commonwealth legislation includes a civil penalty notice provision:
  a) the legislation should specify the penalty for contravention payable upon the issuing of a civil penalty notice;
  b) there should be a mechanism for a contravenor to make representations to the regulator for withdrawal of the civil penalty notice; and
  c) there should be a mechanism for a contravenor to challenge the issuing of the civil penalty notice in court if the civil penalty notice is not withdrawn, with costs to follow the event.
• Commonwealth legislation containing civil penalty provisions for corporations should be amended to provide that when a corporation has:
  a) been found previously to have contravened a civil penalty proceeding provision or a civil penalty notice provision, and is found to have contravened the provision again; or
  b) contravened a civil penalty proceeding provision or a civil penalty notice provision in such a way as to demonstrate a flouting of or flagrant disregard
  for the prohibition;
  the contravention constitutes a criminal offence.
• The Corporations Act 2001 (Cth) should be amended to provide that, when a body corporate commits a relevant offence, or engages in conduct the subject of a relevant offence provision, any officer who was in a position to influence the conduct of the body corporate in relation to the contravention is subject to a civil penalty, unless the officer proves that the officer took reasonable measures to prevent the contravention.

The ALRC is due to report on 30 April 2020.