Preventing Criminal Liability of Directors and Corporations in France and Abroad

Criminal liability is the risk that managers fear most when their companies reach a critical size and management can no longer control everything directly.

Companies have a variety of tools at their disposal to manage risk, particularly the risk of criminal liability: establishing procedures, organising internal control mechanisms, internal audits, involving legal departments in regulatory matters, and more recently the implementation of compliance programmes.

In certain legal systems, including France, the delegation of authority denotes both the transfer of decision-making authority (including the right to bind the company) and the concomitant transfer of potential criminal liability arising from such authority.

In France, therefore, the delegation of authority is both a management tool, and a way to allocate the risk of criminal liability - but it does not relieve the corporation of criminal liability altogether.

In large companies, nevertheless, where it is impossible for top management to supervise everything, delegations of authority are strongly recommended - both to empower middle managers and to protect top management.

But what is the situation abroad, where in many cases, the top officers of the parent company exercise control over the subsidiaries by also becoming officers of the subsidiaries? Does the delegation of authority have the same protective effect for officers’ criminal liability as in France?

What organizational and legal steps can be taken in various countries, to minimize the potential criminal liability of officers while still ensuring parent company control of subsidiaries?