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The administrative Liability of companies according to legislative decree no. 231/2001

The system of Administrative Liability of Companies in case of alleged crimes was considered to be an historic turning-point for Italian Law fifteen years ago. Indeed, because the widespread idea for years had been that only natural persons (Art. no. 27 of Italian Constitution) but not body corporates could commit crimes (societas delinquere non potest), the legislator decided it had to be altered, thus facing the proliferation of the serious pathological event of Corporate crime.

Thanks to Legislative Decree no. 231 of 8th June 2001, Italian judicial system adapted to the several other mainly Common Law systems, considering companies subjected to sanctions when crimes are committed by natural persons in the interest of or for the benefit of the company.

In other words, Italian Law states that companies and corporations might commit crimes and be subjected to sanctions if administrators or employees have committed a certain type of crime – as we may read in the decree, article no. 24 and ff. – and whether the company or the corporation could benefit from the crime.

How can a company – according to decree no.231/2001 – avoid criminal liability when crimes are committed by its administrators (senior positions) or employees?

The answer makes professionals go weak in the knees: “just adopt an adequate Organization Model!”

The model has to classify every possible working activity carried out by seniors or employees and then identify ex ante a list of behavioural rules aimed at preventing crimes.

The existence and the effective fulfillment of an Organization Model can thus enable the company to prove to Superior Council of Judiciary that seniors (or their subordinates) acted in in their own interest or on behalf of a third party, and that they deceitfully eluded corporate rules. Therefore, legal action could be taken only against natural persons and the company would not be incriminated.

When is a company responsible for crimes committed by natural persons during business activities?

The company is responsible for a crime only if (a) the crime has been committed by the specific category of individuals as mentioned in articles no. 5 and 6 of the Decree and (b) the crime has been committed in the interest of or for the benefit of the company.

Therefore, a company is considered liable for the crime committed by a natural person only when it can tangibly benefit from the crime.

In accordance with the established case law, a crime is committed in the interest of a company not only when it falls within the company policy but also when it occurs because the company lacks of specific control tools which could prevent committing crimes.

A mere advantage occurs when the company obtains a pecuniary benefit from the crime as well.

To sum up, if the crime is committed by administrators or employees in the interest of or for the benefit of the company, the latter might be incriminated of administrative liability at the trial against the natural person who has actually committed the crime.

The risks for the company in case of crime

During the trial, the company could face heavy sanctions, both after the final verdict and in interlocutory proceedings.

  • Debarments: the company is excluded from conducting business even for a whole year; its authorizations, licenses and concessions can be suspended and revoked; it can be prevented from participating in supply tenders held by Public Administration. The company can be excluded from tax breaks, loans, grants or have them revoked, and it must not advertise its goods and services.
  • Pecuniary fines: the fine is based on a quota system, each quota ranges from € 258 to €1,549 depending on the crime and on the liability of the company according to judicial discretion.
  • Confiscation of proceeds of crime: once the company has been sentenced, all proceeds of crime are confiscated except for the part which can be returned to the injured person. The term proceeds refer to the economic benefits the company directly gained from the crime.
  • Publication of the verdict.

When is a company not liable for a crime?

According to Article no. 6 Paragraph 1 Decree no. 231/2001 a company is not liable for a crime if it furnishes the following evidence:

  • Executive managers had adopted and used an Organization Model before the crime was committed in order to prevent offences. (so called Model 231);
  • Supervision granting the observance of the model had been assigned to the Supervisory Body of the company;
  • people who committed crime managed fraudulently to avoid Organization and Management Models;
  • Supervisory Body’s control was not omitted nor scarce.

You have us on your side when adopting an organization model

The system of Administrative Liability of Companies in case of alleged crimes was considered to be an historic turning-point for Italian Law fifteen years ago. Indeed, because the widespread idea for years had been that only natural persons (Art. no. 27 of Italian Constitution) but not body corporates could commit crimes (societas delinquere non potest), the legislator decided it had to be altered, thus facing the proliferation of the serious pathological event of Corporate crime.

Thanks to Legislative Decree no. 231 of 8th June 2001, Italian judicial system adapted to the several other mainly Common Law systems, considering companies subjected to sanctions when crimes are committed by natural persons in the interest of or for the benefit of the company.

In other words, Italian Law states that companies and corporations might commit crimes and be subjected to sanctions if administrators or employees have committed a certain type of crime – as we may read in the decree, article no. 24 and ff. – and whether the company or the corporation could benefit from the crime.

With 2009 and August 2011 reforms, the Italian legislator considered companies prosecutable for the so called ‘corporate negligence’ ex Lgs. Decree no. 231/2001 also for safety and environment-related crimes.

As we said before, nowadays, not only upper management but the company is also liable for crimes and will be subjected to the following administrative and disqualification sanctions (Article no. 9 Lgs. Decree no. 231/2001):

  • pecuniary fines (from 100 to 1000 quotas, where each quota may range from €250 to € 1,000);
  • confiscation;
  • publication of the court decision;
  • ban from engaging business;
  • suspension or revocation of authorisations, licences and permits which were involved in the crime;
  • disqualification from having contacts with the Public Administration, except for accessing to public services;
  • disqualification from subsidies, financing, contributions and revocation of those already allowed to the company before the crime;
  • disqualification from advertising goods and services.

Providing the company with Organization Model 231 may clarify the criminal liability of the upper management (excluding criminal responsibility for persons who have not committed the crime), thus avoiding the concept of interest and advantage for the company which derives from the crime actually committed by administrators or employees (articles no. 5 and 6) and also preventing the company from facing the consequences of the abovementioned Article 9.

Bonsegna Law Firm gives companies the legal advice needed in order to endow a company with an Organization Model, a Code of conduct and all the Protocols needed to adapt to Decree 231/2001 and have significant advantages which guarantees to companies:

  • exclusion or mitigation of the company’s liability;
  • guarantee of reliability in the relationships with business partners;
  • a key strength in AGCM (Italian Competition Authority) and Tender Code’s new ‘legality rating’.