Clifford Chance

Further significant changes to the law on corporate criminal liability in the UK are once again on the horizon.

It is fair to say that the Labour government elected in the UK in July 2024 does not agree with everything (or even much) done under the previous Conservative administration, but reforming the law on corporate criminal liability is one area of apparent consensus. Corporates are already adjusting to significant changes made in this area, which have removed practical obstacles to corporate prosecutions for certain economic offences. The Crime and Policing Bill laid before Parliament last week reintroduces proposals originally mooted by the last government that these changes should apply universally to all offences. If these proposals eventually pass into law (as is likely), they will represent a further significant extension of the circumstances in which corporates may be criminally liable through the actions of individuals working within or for them.

Since December 2023, under section 196 of the Economic Crime and Corporate Transparency Act 2023 ("ECCTA"), it has no longer been necessary for UK prosecuting authorities to use the "identification principle" – i.e. to identify the "directing mind and will" of a corporate organisation - in order to pursue criminal proceedings against it for a range of economic offences. Instead, in order for the corporate organisation to be criminally liable, it now suffices for prosecutors to show that any of these range of economic offences were committed by a "senior manager". This definition is wider than that used for the purposes of UK financial services legislation and encompasses a person with actual or apparent authority for making decisions about how a substantial part of the corporate's affairs should be managed, or with actual or apparent authority for actually managing them. These revisions have alleviated real difficulties previously faced by prosecutors seeking to pinpoint the individual(s) responsible for particular alleged criminal acts within large and complex organisations.

The Crime and Policing Bill proposes that this approach should be applied beyond the range of economic offences currently listed in Schedule 12 of ECCTA to all criminal offences. In doing so, it revives almost identical provisions previously included in the Criminal Justice Bill in 2024, which was not able to complete its parliamentary journey because a general election was called. If discussions about the corporate criminal liability provisions of that bill and ECCTA are a guide, it is likely that these proposals will progress broadly as currently drafted.

These further changes have been proposed at a time when corporates are conducting risk assessments and honing their "reasonable prevention procedures" in readiness for the entry into force of the new corporate offence of failure to prevent fraud in September 2025. For more details on the new offence, see our previous briefing.

If the proposals set out in the Crime and Policing Bill are eventually enacted in their current form, corporate prosecutions would become a much more realistic option for enforcement authorities in many situations in which "senior managers" may commit offences in the course of organisations' day to day operations. Although the proposals are at an early stage, corporate organisations already adjusting to changes to the law on corporate criminal liability in the UK should take account of them in their risk planning and management processes.