Equity fines proposed for corporate crime
Friday, September 05, 2008
The Criminal Sentencing (Equity Fines) Bill
Dr Bill Wilson, SNP member of the Scottish Parliament, has announced a public consultation on a proposed Bill to allow the Scottish courts to impose equity fines on public companies found guilty of criminal offences, such as breaches of environmental and corporate homicide legislation.
A Report on ICL/Stockline disaster published a year ago suggested equity fines as an alternative penalty for criminal offences committed by companies.
The idea of equity fines is that the level of the fine is based on the value of the offending company. The courts would have the option to order the company to issue a new set of shares which would then be sold to meet the fine. Those in favour of equity fines argue that they punish the owners and shareholders of the company who are those most likely to have benefited from the offending behaviour.
It is said that companies often find the revenue to meet fines from operating costs, perhaps by cutting wages or increasing prices. The courts are aware of this and when determining the level of a fine they are conscious that too large a fine may put the company out of business.
It has been suggested that criminal actions by companies, even those resulting in injury or death, are not adequately punished or deterred by the current level of fines. Figures in the Consultation document indicate that the average fine for offences involving a fatality committed between 2001 and 2005 was just under £27,750 and in 50% of the cases the fine for causing the death of a worker or a member of the public was less than £12,500.
The proposed Bill also contains a supplementary provision that would allow the court to order a Company Background Inquiry Report before sentencing. It is intended to help the courts to set more effective sentences as, at the moment, the courts often only have limited information about the company and this is usually provided by the company itself.
The proposed Bill is being backed by a number of interested bodies.
The closing date for responses to the consultation is 1st December 2008.
Elena Fry, Partner in our Health and Safety Team, commented “If this proposal is approved, it will create much stiffer penalties for corporate crime. All companies need to make sure that they comply with the law. Responses to the consultation are encouraged from interested parties and business groups. It could be argued that the introduction of equity fines in Scotland will inhibit investment in Scotland and the business community should make sure its voice is heard.”
Link to consultation
If you would like to find out more or have any questions, please contact David Stevenson or Elena Fry on 0141 228 8000.