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Criminal of mens rea, the proponents have

Criminal Liability of directors in
companiesAbstract

The
past decades have brought forth a plethora of companies dominating the
worldwide markets. In the normal course of business, these enterprises run
business transactions with multiple clients spread across the entire globe. It
is quite commonplace that the business dealings end up violating the laws of
the host country. The wrongs committed by a corporation when brought before the
court, raises questions of legal importance. Legal experts have for long
debated the imputation of punishment on the company citing the universal
principle of a corporation being an artificial person. Arguing that an
artificial person is devoid of mens rea, the proponents have tried to evade the
corporation’s responsibility from paying damages. The courts over the years
have changed their stance to hold the companies liable for the harm done to the
aggrieved, pursuant to their act.  This
article traces the transition in the ideology of judges over the years to the
legal propositions as of date. It also draws a parallel between the legal
frameworks in India and the prevalent laws in the overseas. At last, the
researcher tries to address the recurring issues with the present legal outlook
and suggest appropriate alternatives for them.

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Keywords

Introduction

The identity of a
corporation has been dealt with meticulously in the late nineteenth and early twentieth
century. Philosophers have expended significant amount of time in imputing a
personality to an enterprise. Theories of varied nature had been scrutinized over
the time in an attempt to give a firm shape to the vague definition of a
corporation. The Fiction Theory described a company as a fictional person with
the sole existence of juridical purposes. This view was aptly refuted by
Realistic Theory which advocated that a company had a real psychic personality
which wasn’t a fruit of law. Organism theory, on the other hand propagated a
company to be a living organism with its members acting as hands and limbs
while the manger being the head. Every theory added a part of its own
interpretation to the workings of a company but was plagued with fallacies,
hence couldn’t be implemented to its entirety. The courts and legal fraternity
have over the years inclined towards the notion claiming a corporation to be a
fictional person or rather a legal person with no mind of its own.1

With the recognition of
a company as legal person, the rights of an individual were granted to a
corporation in general. Despite the fact that the rights of an individual are
similar to that of a corporation, there lies an important variation between
them. The sole difference between a corporation and an individual is the existence
of corporate veil.2
It is a legal provision that safeguards a company being personally liable for
the debts incurred.  Except the
aforementioned difference, a company just like an individual is provided with
right to sue an individual for harm caused. The inverse is also true. Hence, an
individual aggrieved by the acts of a corporation was invested with the right
to sue for compensation. The latter right was challenged in legal diaspora as
being illogical citing the absence of mind. Moreover, the rule of Ultra Vires
and absence of physical entity further barred criminal proceedings against
corporations.

The courts, in the mid
eighteenth century held the corporations liable on the grounds of misfeasance rather
than malfeasance. Public inconvenience due to the inaction of the corporation
was held as a standard for assessing the claim for damages. Criminal charges on
a company were not maintainable on the ground of lack of intent. 3

 

1 Theories of Corporate
Personality, 03.03.2016, https://legalpoint-india.blogspot.in/2016/03/theories-of-corporate-personality.html

2 http://www.businessdictionary.com/definition/corporate-veil.html

3 Corporate
Criminal Liability: What Purpose Does it Serve?, V.S Khanna, Harvard Law Review,
Vol. 109, No. 7 (May, 1996)

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