THE CRIMINAL LIABILITY OF CORPORATIONS
THE CRIMINAL LIABILITY OF CORPORATIONS
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Date
2014-02-24
Authors
Ogah Ebuga, Justina
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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
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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
Description
Submitted in partial fulfillment of the requirement
for the degree Master of Laws (LL.M.) to the
Faculty of Law, Ahmadu Bello University,. Zaria
Nigeria.
Copy Right Statement
No part of this Thesis may be reproduced or
transmitted in any form without the express permission
of the author in writing.
Keywords
CRIMINAL,, LIABILITY,, CORPORATIONS