Corporate Crimes

What are we saying when we talk about Corporate Crimes?

We will start by referring to another (Spanish) example of this blog, Practical Guide to Corporate Crimes 2017, published some time after the article below, and which updates and complements what you have here.

The concept of corporate crimes was introduced to Spain in 1995, but the wording of them is so vague and extensive that, to understand prohibited behaviors they have to be governed by jurisprudence.

Due to its transcendental importance, it is worth bearing in mind that in Spain (currently) there are no imprudent corporate crimes (which have been committed due to lack of due diligence). All corporate crimes require fraud (bad faith).

However, let’s see, as an opening example, how the Criminal Code defines a given crime, and the corresponding punishment for it:

Criminal Offense

Falsifying social information (article 290)
Prison from 1 to 3 years and a fine of 6 to 12 months

Imposing abusive agreements (articles 291 and 292)
Prison from 6 months to 3 years or a fine of up to 3 times the benefit obtained.

Denying or preventing corporate rights (Article 293)
Penalty of a fine of 6 to 12 months

Denying or preventing inspection or supervision (Article 294)
Prison from 6 months to 3 years, or a fine of 12 to 24 months

Unfair or fraudulent administration (Article 295)
Prison from 6 months to 4 years or a fine of up to 3 times the benefit obtained.

Denying or impeding Corporate Rights

(293CP) (Repeated behaviour is not necessary for it to be be a crime)

What behaviors are included in this crime?

They can include stealing information claimed that affects the rights (not all, it can just be the minimum and essential) of the economic and political natures of the status of a partner. Thus, protected rights of an economic-patrimonial nature are the right to participate in the benefits, to participate in the liquidation and preferential subscription quota; political rights for information, and assistance and voting in general meetings (…)

Within the Right of Information of the Shareholder, a crime can be committed (according to Article 293 CP) when information is denied, after a request in writing, both prior to a meeting of the board or, verbally, during this same meeting. This can include reports or clarifications that the injured party deemed necessary concerning matters included in the agenda.

Therefore, the administrators will be obliged to provide them, except in cases in which, in the opinion of the president, the publicity of the data requested damages social interests. This exception will not apply when the request is supported by shareholders representing at least a quarter of the capital.

Likewise, an offense is committed (pursuant to article 293 of the Criminal Code), when, following a request in a general meeting, any shareholder is prevented from obtaining from the company, immediately and free of charge, any documents that must be submitted for approval of the company. This includes the management report and the report of the account auditors.

Sentence nº 532/2012 of TS, Room 2ª, of the Criminal, June 26, 2012

Unfair Administration

295 CP (and UNDUE APPROPRIATION 252 CP)

If the manager of a company acts unlawfully outside the powers granted, we would be looking at a possible crime of misappropriation. And when unlawful acts are carried out within the framework of the powers entrusted to the administrator, we would be looking at the crime of unfair or fraudulent administration emanating from the article. 295 (SSTS 462/2009, 12-5, 623/2009, 19- 5, 47/2010, 2-2, and 707/2012, 20-9, among others).

But what it is not possible is to estimate is that, by the mere fact of executing acts related to the administration faculties granted by society, how the application of the two criminal types referred to must be carried out. Sentence nº 906/2012 of TS, Room 2ª, of the Criminal, November 2, 2012

Reform of the Penal Code

The reform of the Penal Code aims to repeal Article 295 of the Criminal Code, so that the crime of Unfair or Fraudulent Administration ceases to be a corporate crime and becomes an actual crime (subsuming it in Article 252 of the Criminal Code).

What is hoped will be achieved by this? So that the following illicit behaviors can be punished as a crime:

● Payments for fictitious services.
● Simulation of non-existent assessments.
● Economic operations that harm the administered assets, with a clear excess of the power received.
● Hiring services that are not provided.
● Recruitment of services for a price higher than the actual market price.
● Creation of “B” boxes outside the control of the owner of the managed assets.
● Concession of high salaries or millionaire retirements to members of boards of directors.