The concept of eternal punishment envisaged by Matthew (25:46) could never have been intended to extend to the punishment of companies on conviction for a breach of the Health and Safety at Work etc Act 1974 (HSWA) or other regulatory offences. And neither could our legislators, when drafting the Rehabilitation of Offenders Act 1974 (ROA), have had in mind the wise words of Alexander Pope "to err is human, to forgive divine" when it came to corporate offenders. For corporate offenders, the slate is never wiped clean.
In this, the first part of our series on "Have you got it covered? The consequences of regulatory non-compliance", we consider the ongoing impact of cautions and convictions on corporate offenders and suggest how the impact of such enforcement may be lessened.
Individuals and spent convictions
The principle behind the ROA is that when convicted of an offence, after a prescribed period of time, an individual can claim a clean record and act as if no offence had ever been committed. The old record does not, as a general rule, need disclosing on job applications, when applying for insurance or in any subsequent civil or criminal proceedings.
There are of course exceptions to the general principle. Individuals who have received a prison sentence of more than two and a half years will have a longer period of penance (which in some cases will never expire), and certain professionals also retain an obligation to disclose both spent and unspent convictions.
No such rehabilitation for companies
The ROA does not, however, apply to companies convicted of, for example, breaches of the HSWA, the Environmental Protection Act 1990 or even minor regulatory convictions. Such past convictions will continue to have a direct impact upon insurance premiums and tenders for work.
For companies, nothing, from caution through to conviction has a legal shelf life. A caution should not automatically be viewed as the easy option and very careful consideration should be given to the consequences of accepting it when offered instead of prosecution.
Does the company really accept guilt? Importantly, does it really understand and is it willing to accept the consequences of a permanent record? If the alternative is prosecution and there is a high risk of conviction, then accepting a caution may be a no brainer, but that isn't always the case.
If asked for details of any previous convictions, companies with a criminal record - whether for environmental, health and safety or other offences - must disclose this record, however old the conviction is. This can quickly result in the end of the tender opportunity, particularly in public service tenders.
The conviction may also come back to bite if the company subsequently issues a prospectus or lists its shares on a regulated stock exchange in the UK or elsewhere. Of course there may be ways around that, for example through the transfer of the business to a new corporate entity to leave the conviction behind. That in turn is not without complications as, if that is the sole reason for the transfer, it may lead to an investigation and potential sanctions against the directors by the Insolvency Service.
So, corporate convictions aren't just a question of paying a fine and costs and moving on. With the possibility of permanent long-term implications, it is crucial to ensure that regulatory compliance is achieved and prosecution avoided.
Managing a caution or conviction
If a company does have a caution or a conviction though, there are ways of managing its impact:
- On any subsequent convictions a previous offence can be taken into account on sentencing and may have an upwards impact on the fine that is imposed. In reality though, if the earlier offence was longer than five years ago, a prosecutor is not likely to refer to it. Its relevance can also be challenged if the facts of the current offence are entirely different.
If reference is to be made to a previous record, it will be included in the Schedule of Exacerbating and Mitigating circumstances (often referred to as a "Friskies" schedule), which the prosecution should prepare and serve in advance of the hearing. A company can't claim an unblemished record if it isn't mentioned (as that would be misleading), but the prosecutor's absence of a mention of it might at least not make matters worse.
- If a conviction has to be disclosed on a public service tender, a question can be raised early in the tender process as to whether or not the request for disclosure is intended to identify suppliers, contractors and service providers who must be excluded pursuant to the Public Contracts Regulations 2006.
Those regulations are intended to exclude those who have convictions for example in which bribery, corruption, money laundering or fraud is involved. Just asking the question might, if nothing else, flag to the procurement team that other offences should not necessarily exclude the company from consideration.
- Following conviction, it is sensible to prepare a brief summary of the case including facts, the key mitigation presented and the outcome, and identify key changes made since the incident. There is then a ready explanation (for insurers or on tenders where it is an issue) as to why, even though disclosable, it should not now be taken into account or reflect badly upon the business. Key personnel changes over time often mean that this information is difficult to retrieve when needed later.
A final thought
If convicted or cautioned, a company will never achieve the right to the "clean slate" which is afforded to individuals. On the other hand, if you are a manager or director in the business, convicted of an offence arising from the business, the fact that in time a conviction against you personally does become "spent" may be news which brings some comfort!