As predicted by my colleague Jonathan Grimes last week, the new definitive sentencing guideline on corporate manslaughter, health and safety and food safety (published today and effective in any case sentenced on or after 1 February 2016), allows for significantly greater fines to be imposed on convicted companies.

The existing SGC corporate manslaughter guideline suggests that “appropriate fine will seldom be less than £500,000 and may be measured in the millions of pounds”. However, in the (admittedly few) cases sentenced since the Corporate Manslaughter and Corporate Homicide Act 2007 came into force, fines have tended to fall far short of the proposed minimum, limited by the assets of the companies that have been successfully prosecuted.

Now, the range of fines available is significantly wider, and significantly higher at the upper end. For the smallest, “micro”, organisations (turnover of up to £2 million) convicted of an offence of lower culpability the starting point is £300,000 with the range starting at £180,000. At the other end of the scale, fines of up to £20 million (and even beyond) are envisaged in cases of large (£50+ million turnover) organisations guilty of the most serious forms of the offence.

The Sentencing Council has also published their analysis and research underpinning the new guideline. While the dataset for corporate manslaughter was considered too small to be of practical use, the equivalent material for health and safety prosecutions shows that the average (mean) fine imposed has increased from £41,400 in 2011 to £46,000 in 2013. A quarter of fines in 2013 were larger than £60,000, and a quarter under £5,000. Only 5 per cent of convicted defendants received fines of over £225,000. It is clear that the new guideline seeks to fundamentally shift the size and range of fines upwards, particularly towards the upper end.

The new guideline sets out in detail the proper procedure for the calculation of fines. A convicted defendant organisation must provide to the court comprehensive accounts for the last three years, in order that its financial status can be accurately assessed. Companies and partnerships must provide annual accounts (preferably audited), and courts will pay particular attention to turnover, pre-tax profits, assets and directors’ remuneration, loan accounts and pension provision. Should a court not be satisfied that sufficient reliable information has been provided it may infer that the offender can pay any fine.

Fines are expected to meet the objectives of punishment, the reduction of offending through deterrence and removal of gain derived through the commission of the offence. Significantly, the guideline requires fines to be “sufficiently substantial to have a real economic impact”, in order to “bring home to management and shareholders the need to achieve a safe environment for workers and members of the public affected by their activities.” In some circumstances putting a convicted organisation out of business may be an acceptable consequence.

Clearly, it will take some time after the guideline comes into force next February to assess its effect, but organisations will undoubtedly be alert to the huge increase in potential penalties and may need to decide whether this affects their litigation strategy in the unfortunate event that they find themselves subject to prosecution.