New Criminal Code Imposes 'Corporate' Criminal Responsibility: Steps Companies Can Take to Mitigate Risks
By Adrian Fernando / 28 April 2023
Key Points
- Corporations are considered legal subjects in criminal liability.
- The criminal sanctions that can be imposed on a corporation include (i) primary punishment in the form of fines and (ii) additional punishment in the form of compensation, license revocation, suspension of business activities, and business dissolution.
- The absence of preventive measures and compliance against legal provisions is considered an act of omission and an indication of a criminal act by a corporation.
- Companies need to create and implement a code of ethics, compliance program, regular training, internal audits, and internal complaint platform as preventive measures against legal deviations within the company.
Background
However, it should be noted that the New Code is entry into force provided that (i) the implementing regulations of the New Code must have been stipulated no later than two years from the date of promulgation, or on 1 January 2025, and (ii) the New Code will become effective after three years from the date of promulgation, or on 1 January 2026.
One of the essential substances of this New Code is regarding ‘corporate responsibility’. Although it is not really a new thing since it has previously been regulated under the Supreme Court Regulation No. 13 of 2016, however, by the adoption the detailed provisions regarding the corporate responsibility in the New Code, then this increasingly strengthened the law enforcers in carrying out legal remedy in asking for criminal responsibility from a corporation.
The Criteria of ‘Corporation’
The New Code defines 'corporataion' broadly, which includes:
legal entity (limited liability company, foundation, cooperative, state/local-owned enterprise);
association, whether incorporated or not;
business entity (firm, limited partnership).
Meanwhile, the criteria of corporate management are as follows:
has a functional position in the organizational structure, or in a work relationship or other relationship. ‘Functional position’ is defined as a person, either as the main subject or participatory subject, who has the authority to (i) represent, (ii) make decisions, and (iii) exercise oversight of the corporation;
act for and on behalf of or for the benefit of the corporation;
in business or corporate activities, whether carried out individually or jointly.
As an extension of the ‘management’ criteria above, corporate crimes can also be committed by the supervisor, controller, or beneficiary owner of a corporation who is outside the organizational structure, but can still control the corporation.
The Criteria of Corporate Crime
Not all corporate actions can be held accountable. The New Code has provided limitations on an action by a corporation that can be punished, if it is proven as follows:
included in the scope or business activity;
unlawfully benefiting corporations;
accepted as corporate policy;
the corporation does not take the necessary steps to prevent and ensure compliance with legal provisions; and/or
corporations allow crime to occur.
Criminal Liability
Criminal liability can be imposed to:
corporation;
administrators who have functional positions;
order giver;
control holder, and/or
beneficiary owner.
Specifically for corporation, the criminal liability that can be given are:
primary punishment, in the form of fines Category IV to Category VIII, with fines ranging from Rp200,000,000 to Rp50,000,000,000; and
additional punishment, ranging from compensation, revocation of permits, suspension of business activities, to dissolution, and many more.
If the corporation does not carry out the fine as decided by the Court, the Attorney General has the authority to confiscate the Corporation’s assets for auction in order to pay off the fine.
In addition to criminal liability, the New Code also regulates other actions that can be imposed on corporation, namely in the form of takeover, placement under supervision, and placement under guardianship, which will then be further regulated in a government regulation.
Steps to Mitigate Risks
The existence of this corporate responsibility provision provides a clear understanding for companies to take proactive measures to prevent criminal acts within the company and avoid the risk of criminal liability in the event of a criminal act has been occurred within the company.
There are several things that companies can do. First, create a code of ethics that sets standards for employee ethics and behavior to prevent legal deviations. Second, establish a compliance program where the compliance division within the company ensures that operational activities within the company comply with legal provisions. Third, regularly train employees on ethics, behavior, legal compliance, and corporate responsibility. Fourth, conduct regular internal audits to ensure that all parties within the company adhere to established procedures. Fifth, establish an internal complaint platform as a preventive measure against legal deviations within the company.
Key Contacts
Adrian Fernando
