Determining the criminal liability of an organization such as a corporation involves unique difficulties. Section 22.2 of the Criminal Code makes an organization a party to an offence through the acts of its senior officers acting within the scope of their authority.
Section 22.1 of the Criminal Code sets out circumstances in which an organization can be held criminally liable for negligence and was considered in R v. Metron Construction Corporation where the court affirmed that the actions of a senior officer may result in conviction of a corporation for criminal negligence causing death where that individual demonstrates a “marked and substantial departure from the conduct of a reasonably prudent person in the circumstances.”
Moreover, section 21 of the Criminal Code governs that when an organization commits a criminal offence, its directors, officers or employees can be held personally liable for the criminal acts of the organization, either as a principal or as a party to the offence, if they participate in or encourage wrongdoing.
In most cases, a parent corporation cannot be held liable for the criminal acts of its subsidiary merely based on the existence of a parent-subsidiary relationship since criminal law recognizes the existence of the “corporate veil” that separates a company and its shareholders, as enunciated in Salomon v. A. Salomon & Co. Ltd.
The Criminal Code contains a number of sentencing provisions directed at offences affecting the capital markets, such as fraud, fraudulent manipulation of stock exchange transactions, insider trading, tipping and making a false prospectus. Section 380.1, for example, sets out several factors that the sentencing judge is required to consider as aggravating factors in imposing a sentence upon conviction for one or more of these offences, while section 380.1(2) prohibits the sentencing judge from considering a number of factors as mitigating factors in imposing a sentence upon conviction for one or more of these offences affecting capital markets.
IMPRISONMENT & FINES
In the realm of the “white-collar crimes”, while an organization cannot be imprisoned, its directors, officers or employees certainly can be. The length of imprisonment that can be imposed depends on the offence in issue.
A fine can be imposed on a corporation in lieu of imprisonment. Some of the factors that will be considered in the disposition are the nature of the offence and the circumstances surrounding its commission, the injury to the public caused by the offence, and the profit obtained by the wrongdoer. If the wrongdoer fails to pay a fine in accordance with the order of the sentencing judge, the Attorney General of the province or of Canada may file the order with the court and enforce it as if it were a civil judgment, by obtaining writs of execution and sale with respect to the corporation’s assets and property.
PROBATION
The Criminal Code gives sentencing judges broader powers to impose a wide range of conditions on convicted organizations. The conditions that can be imposed on an organization are numerous and potentially unlimited.
DEFERRED PROSECUTION AGREEMENTS
Deferred prosecution agreements (“DPAs”) provide an alternative, non-criminal resolution vehicle that can be used by corporations to self-report wrongdoing as options to resolve criminal or quasi-criminal charges for corporations whereby the enforcement authority agrees to suspend or defer prosecution in exchange for cooperation and compliance with certain conditions.
SECURITIES-RELATED OFFENCES
The Criminal Code makes it a criminal offence to engage in insider trading or tipping, as well as certain other securities-related misconduct. The Code also sets out a number of other particularized securities-related offences (e.g. against wash-trading, gaming in stocks, making a false prospectus, etc.). In addition, Canadian provincial securities legislation mandates a variety of quasi-criminal offences and administrative regulatory provisions that function, in essence, in the same manner as criminal sanctions.
Section 122(c) of the Ontario Securities Act includes, among other things, breaches of the prohibitions on insider trading, tipping and recommending pursuant to section 76 of the Act. Section 122(1), provides for both monetary (pecuniary) and penal (non-pecuniary) sanctions.
In addition to the fines and any imprisonment under section 122(1), section 122(4) allows for an additional fine for persons convicted of insider trading. The fine imposed under section 122(4) is based on the amount of profit made or loss avoided by the impugned trade.
The Commission can impose a wide range of sanctions, including an administrative monetary penalty for each failure to comply, as well as disgorgement of any amounts obtained as a result of the non-compliance where there has been a breach of Ontario securities law. Even in the absence of a breach of securities law, the Commission retains a wide discretion to make non-monetary orders (e.g. cease trade orders) where such orders are in the public interest.