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11 October 2024

Companies’ Executives Need to Analyze Future Liability Risks Beforehand

Distribution of liability inside corporation for protection from public charges and analysis of future risks at making decisions were discussed by the participants of the discussion «Minimization of public-law risks of prosecution of the corporate CEO’s, managers of subdivisions: from knowledge to proactive management» that took place during St. Petersburg International Gas Forum 2024 at the ExpoForum Convention and Exhibition Centre.

Nowadays business ethics is closely linked to corporate culture, which is one of the most important elements for companies’ management system, remarked Veronika Kiseleva, Head of Compliance and Business Ethics Practice of SIBUR and Co-Chair of Council for Development of Compliance and Business Ethics, opening the discussion. However, recently business issues have become so often resolved by the Criminal Code that a significant demand for a separate type of compliance has appeared – criminal law, as the leading legal theorists and practitioners note. «In its turn domestic flagship companies in the field of implementation and development of Compliance system are paying more attention to scaling up of such area as administrative and criminal compliance, which allows not only to distribute liability between the heads of the appropriate functions and directions, but also to strengthen business reputation of the company», – moderator remarked.

Number of criminal cases against entrepreneurs, according to statistics of the judicial department of the Supreme Court of the RF, is not reducing, as well as number of cases of instituting administrative action against them. Mainly charges are brought under articles on fraud, embezzlement or misappropriation, illegal entrepreneurship, abuse of powers, tax evasion and a number of others, said Valery Zastrozhin, lawyer, Head of Criminal Practice of the Bar Council «Monastyrsky, Zuba, Stepanov and partners». At the same time, the guilt may be reckless by form – if the offender did not foresee the consequences of his action, and specifically in this field many risks can be eliminated via creation of special system of protection of company and its corporate CEOs. For this we need to regulate in detail areas of responsibility and authorities of employees in order CEO, for example, did not have to answer for the breach committed by his subordinate.

Significant risk for the companies is the prospect of forfeiture of property within corruption criminal cases, said Sergey Taut, lawyer of Pepeliaev Group. He told about the practice of returning the property, which was found to be obtained by means of corruption proceeds, to the state treasury by claims of General Procuracy. This can happen even if the transaction was made many years ago and even if the person accused of corruption-related crime is not relevant to the company that made the transaction. Taut shared that for the latest 3 years there were 84 cases of decision making on forfeiture and 86 % of such property was already turned into state’s revenue. He added that the Constitutional Court of the RF started consideration of the issue of period of limitations application in corruption-related crimes and the result might change the situation in many ways.

The lawyer recommends to carry out risks audit beforehand. Risk factors include acquisition of assets as a result of privatization in the past, participation of the owners, beneficiaries of business or officers coordinating the industry in corruption investigations, plans on acquisition of assets earlier belonging to the state.

Subsidiary liability may also be imposed on the company and its executives in case the corruption investigation is carried out in relation to its contractors, added Alina Khammatova, lawyer of S&K Vertical, that means that they also should be checked for risk. She also reminded that responsibility for executive could arise for the fact that when risks appeared he failed to take actions to save the company and within bankruptcy and settlements with creditors the responsibility would devolve on him. Transactions concluded at a price below market will be most likely recognized as causing harm to the creditors and cancelled: «When making transactions, it is worth looking at the consequences 10 years ahead», – Alina Khammatova said.

Representative of business, Alexander Krinitsyn, Head of Department of T Plus PJSC, also shared administrative risks management practices. He presented to the participants tools and solutions of company on effective processes management, including development of skills of workers at internal and external profiles, customer service with unified information field, and also search of balance in the environment of high normative activity and state control.

In order to minimize risks of bringing to responsibility we need regulation of processes, standardization of approaches, timely risk analysis and their estimation in future in decision-making, acknowledged the participants of the discussion.

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