Hilary Muza 
THE release of the Pandora Papers on October 4, 2021 caused quite a tumult. Thousands of companies, and the influential people behind them, were implicated in fraudulent misrepresentations, participating in and benefitting from illicit financial flows, concealing assets for the purpose of tax evasion and tax avoidance.
This begs the question, when a corporate body like a company commits a crime, who is liable? The company itself or the people acting through the company? In this week’s article, I will look at the criminal liability of corporate bodies, who is implicated in crimes attributed and how, if possible, they can get off the hook.
The general rule according to section 385(1) of the Criminal Procedure and Evidence Act [Chapter 9:07] (hereinafter “the CPEA”) is that in any criminal proceedings against a corporate body, a director of that corporate body shall be cited as the offender in his or her representative capacity. The person so cited can be dealt with as though he/she were the person accused of having committed the offence in question. This was accepted in Meikles v The State HH 565/14 at p.5.
There are, however, a few riders to this general rule. Firstly, if one ceases to be a director of the company, absconds, or for whatever reason fails to attend, the magistrate may, at the request of the prosecutor, substitute the said director for another director.
Secondly, if the company is committed to trial, the director before the court cannot, as a matter of law, be imprisoned on the company’s behalf. The law demands that any such director be released on his own recognisance to stand trial.
A release on one own recognisance means a written promise to show up for future court appearances and to not engage in illegal activity during that time. This provision in the CPEA is consistent with the Constitution of Zimbabwe, which in section 50, makes admission to bail a right and not a privilege.
Thirdly, in the event that the company is found guilty and convicted, the court cannot imprison the director in question.
It can only impose a fine, which is payable by the company. Even where the relevant enactment makes no provision for the imposition of a fine in respect of the offence in question, the court is obliged to impose a fine regardless and not a prison sentence.
In the exercise of power or the performance of the duties of a director meant to further the interest of the company, any such conduct is deemed by the law to be the conduct of the company. Even if that conduct was accompanied by an intention on the part of the director, that intention is deemed to be the intention of the company itself.
Companies are juristic persons separate from humans who are identified by the law as natural persons. The reluctance to punish a natural person for the sins of a company is what underpins the separate liability of the company and its directors. However, a director can be prosecuted for the same offence as the company in his personal capacity. It is not uncommon to see directors of companies denied bail for acts that they performed on behalf of a company.
This, in my view, is inconsistent with the Companies and Other Business Entities Act [Chapter 24:31] (hereinafter “the COBE Act”) which replaces most criminal penalties with civil ones. For example, offences under the COBE Act generally apply for offences where a director fails to comply with the specific duties and obligations of his/her office such as failing to comply with allotment of shares and debentures to be dealt in on stock exchange (section 120), restrictions on offering shares for subscription or sale (section 114) or wilfully conceals the name of a creditor (section 149).
These offences speak to the personal liability of a director who has failed in his/her fiduciary duty (or duty of good faith) to the company. This has nothing to do with the company’s own intentions which the director would be acting in pursuance of.
Criminal liability of corporations is provided for in section 277 of the Criminal Law (Codification and Reform) Act [Chapter 9:23] (hereinafter “the Code”). Jutices Hungwe and Musakwa JJ (as they then were) in the case of Chikuku v The State HH 527-16 made the following comments on section 277 of the Code:
“In terms of s 277 (3), any conduct, which constitutes a crime for which a corporate body is or was liable to prosecution, is deemed to have been the conduct of every person who at the time was a director or employee of the corporate body. However, where it is proved that a director or servant took no part in the conduct, such criminal liability shall not apply to him or her.
The onus is on the director or servant to prove on a balance of probabilities that he did not take part in the commission of the offence and could not have prevented it.” The law does not contemplate detaining and imprisoning directors who act in good faith on behalf of the companies they represent. In cases where no criminal liability is alleged on the part of the director in his personal capacity, the default position of the law is that the director must not be subjected to imprisonment even if the company is found guilty.
Muza is an admitted legal practitioner, conveyancer and notary public. He writes in his personal capacity and is reachable at hilarykmuza@gmail.com and at 0719 042 628.
