350 22: Fraudulent and criminal behaviour Part H Governance and ethical issues relating to business
(e) Communication – anti-bribery policies and procedures should be embedded in the fabric of the
organisation and communicated both internally and externally. This is likely to include relevant
training if proportionate to the risk.
(f) Monitoring and review – the anti-bribery policies and procedures should be regularly monitored
and reviewed. Amendments and improvements must be made as appropriate. This is because the
risks an organisation faces will change so adaptation is necessary.
Whether an organisation had adequate procedures is a matter for the courts who will look at the
particular circumstances an organisation is faced with. However, the onus is on the organisation to prove
that its procedures were adequate. Reasonable and proportionate hospitality is not prohibited, although
what is reasonable and proportionate will be determined in future cases.
The maximum penalty that may be imposed on a guilty organisation is an unlimited fine. However, it is
likely that its business will suffer too as a consequence of loss of reputation and compensation payable
for civil claims against the directors for failure to maintain adequate procedures.The Bribery Act was the subject of a technical article in Student Accountant in June 2011.6 Criminal activity relating to companies
We have already seen a number of potential crimes in relation to the operation and management of
companies, and the way in which these can be investigated.
With regard to the operation and management of companies, a company as a legal person may be
prosecuted for many different types of crime. However, this is nearly always in conjunction with the
directors and/or managers of the company. Companies have been prosecuted for manslaughter
(unsuccessfully), fraud, and breaches of numerous laws for which fines are stated as being punishment,
such as health and safety laws.
Prosecutions are often brought against directors of insolvent companies for fraudulent trading and
wrongful trading.6.1 Criminal offences in relation to winding up
Criminal offences in relation to winding up include: making a declaration of solvency without reasonable
grounds and fraudulent trading.The law seeks to protect creditors who may be disadvantaged by the company being liquidated. Directors
can be found guilty of various criminal offences if they try to deceive creditors, and, in some cases, even
if they do not attempt to deceive creditors, but the effect is the same as if they had.6.2 Declaration of solvency
A winding up can only be a members' voluntary winding up if the company is solvent. If the company is
not solvent, the creditors are far more involved in the winding up process. In order to carry out a
members' voluntary winding up, the directors have to file a declaration of solvency.
It is a criminal offence punishable by fine or imprisonment for a director to make a declaration of
solvency without having reasonable grounds for it. If the company proves to be insolvent, they will have
to justify their previous decision, or be punished.6.3 Fraudulent trading
This criminal offence occurs under the Companies Act 2006 where a company has traded with intent to
defraud creditors or for any fraudulent purpose. For example, a director obtaining credit when there is no
good reason to expect that the company will be able to repay the debt; R v Grantham 1984. Offenders are
liable to imprisonment for up to ten years or a fine.FAST FORWARDExam focus
point