Liability of collective entities – the Act version 2.0. New regulations and requirements for entrepreneurs.

The government has prepared and submitted to the Sejm a draft Act on collective entities’ liability for criminal acts. The regulation aims to facilitate the imposition of sanctions on collective entities. This applies in particular to situations in which such entities failed to act diligently when selecting persons (e.g. employees, representatives or subcontractors) to supervise their activities or to become members of the entity’s constitutive organs.

The Minister of Justice and General Prosecutor, Zbigniew Ziobro, declared at the press conference on the Act: We are introducing a modern tool to effectively fight criminal offences that are committed in the interests of large companies and legal entities. The Act is very necessary, as the existing law fails to fulfil this aim.

The most important changes introduced by the Act are:

  • the possibility to establish an entity’s liability in independent proceedings (without needing to have previously secured the conviction of a connected natural person e.g. a member of the entity’s constitutive organs),
  • increasing the maximum penalties imposed on collective entities to PLN 30 million (or exceptionally to PLN 60 million), and making it possible to dissolve a collective entity,
  • punitive measures in the form of prohibiting certain promotional or advertising activities, banning participation in public tenders or in applying for grants and subsidies etc.
  • defining procedures and protective measures concerning “whistleblowers” (persons who report irregularities),
  • making collective entities directly responsible for the actions of their employees, subcontractors, representatives etc. via the so-called concept of “anonymous guilt” if the true (natural person) wrongdoer cannot be identified.

The draft Act should be analyzed in the context of other governmental legislative initiatives (e.g. the draft Act on Transparency in Public Life from 2017) and recommendations of the Warsaw Stock Exchange (WSE) in a document entitled “Recommended standards for systems to manage anti-corruption compliance and whistleblower protection systems in enterprises on the market organized by the Warsaw Stock Exchange (2018)” concerning, in particular, companies’ anti-corruption policies.

Collective entities (other than micro-entrepreneurs) will be particularly vulnerable to sanctions if they do not have or apply internal procedures and regulations specifying, among others, the procedure to be applied if an offence may have been committed or if they are unable to demonstrate due diligence in the organization of their activities.

Entities which possess, and properly apply, appropriate internal regulations will significantly reduce their potential liability and that of their management board members. However, any such internal procedures cannot be illusory, so employees must be well acquainted with and trained in those procedures.

The Act enters into force six months after its announcement date so there will be very little time to prepare for the newly-required procedures, especially as they should actually be applied in the interim period. The Act will have a huge impact on entrepreneurs, particularly on the functioning, organization and activities of collective entities. Likewise, it expands the scope of potential liability of members of their constitutive organs and managerial staff.

Our experts will be happy to help you to amend your entity’s regulations so as to ensure compliance with the new legal reality.

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