Corporate Liability in Singapore

By Andrew Martin and Yi Lin Seng (Baker McKenzie Singapore)

I.              Corporate liability deriving from criminal activity

1.             Nature and basis of liability

Under Singapore law, a company has a legal personality and is capable of being prosecuted for a wide range of criminal offenses.[1]

To convict a company of a criminal offense in Singapore, it is generally necessary to prove beyond reasonable doubt the following elements:

  • The company committed the act prohibited by the offense (the actus reus).
  • The company had a guilty state of mind (that is, the company had the required intention when committing the act that makes it an offense) (mens rea).[2]

As artificial legal persons, companies do not have their own intentions. In this respect, two main approaches have been developed in case law to attribute the mental states of the company’s employees to the corporate entity. These are: (i) the “identification principle”; and (ii) the “agency principle.”

The identification principle involves imputing to the company the acts and the states of mind of those who represent the “directing mind and will” of the company. This means that in cases where the criminal act and the criminal state of mind in question of a person can be attributed to that of the company, the company can be liable to criminal prosecution.[3] In such a case, the liability is primary (and not vicarious), since the person in question is “an embodiment of the company.”[4] Generally speaking, the identification principle usually applies to actions of the board of directors, the managing director and other superior officers who carry out functions of management, and speak and act as the company. Thus, the “identification principle” takes into account a narrower range of individuals.

The agency principle imputes vicarious liability to the company where a person is regarded as the company’s “servant,” instead of being regarded as the “company” itself. The agency principle is increasingly used in statutes that seek to hold a company “vicariously” liable for criminal acts likely to be performed by the companies’ officers and employees.[5] Generally speaking, a corporate employer is only vicariously liable for the acts of its employees and agents if the person’s acts were within the scope of a function of management properly delegated to him.[6]

In addition to case law, some statutes specifically provide for attribution of a state of mind of particular persons.[7] Statutory provisions expressly allow proof of the state of mind of a corporation to be based on evidence that officers, employees or agents of the company engaged in criminal conduct within the scope of their actual or apparent authority had that state of mind of committing the offense.

Offenses of strict liability do not require proof of intention, recklessness or even negligence.[8] If employees commit strict liability offenses in the course of carrying out their employments, which are determined on a case-by-case basis, the company may also be vicariously criminally liable.

2.             Type of crimes/administrative offenses from which, according to the legislature, corporate liability may arise

Generally speaking, if the statute neither expressly nor impliedly provides to the contrary, then a statutory offense is one for which a corporate entity may be charged, regardless of whether the statute expressly makes reference to bodies corporate.[9] Therefore, it is possible for a company to commit most criminal offenses.

For a company to commit an offense as a principal, the following conditions must be met:

  • The offense must be punishable with a fine and not those for which imprisonment is the only penalty. This excludes murder, treason and piracy.
  • A company cannot be criminally liable for offenses that can only be committed by a natural person, such as rape and bigamy.

Offenses that large international businesses may encounter include the following:

  • Money laundering and terrorist financing offenses
  • Tax evasion
  • Bribery and corruption
  • Fraud
  • Breach of export controls
  • Environmental offenses
  • Health and safety offenses

In addition to the possibility of being held liable for primary offenses, companies may also be held liable for committing “inchoate offenses.” Inchoate offenses are offenses in which no substantive offense may have been completed but an offense of a different kind has nevertheless been committed because of the actions or agreements in preparation for the substantive offense. Examples include: (i) abetting the commission of offenses by their employees, contractors, or any business partners; (ii) assisting or encouraging a crime; (iii) incitement; (iv) attempting to commit an offense; and (v) conspiracy.

3.             Identification of companies and entities to which liability may apply

Generally speaking, if the statute neither expressly nor impliedly provides to the contrary, then a statutory offense is one for which an entity may be charged, regardless of whether the statute expressly makes reference to the particular type of entity.

Section 2(1) of the Interpretation Act (Cap. 1) states that, unless expressly or impliedly provided otherwise in the statute in question, a “person” and a “party” include “any company or association or body of persons, corporate or unincorporated.” Section 11 of the Penal Code (Cap. 224), Singapore’s main piece of criminal legislation, also provides that the word “person” includes any company or association, or body of persons, whether incorporated or not.

4.             Corporate liability for crimes committed abroad by its representatives or subsidiaries

Under Singapore law, there is a general presumption against the extraterritorial application of legislation, except in cases where there is specific provision to the contrary.[10]

Specific examples of exceptions to this general presumption are as follows:

  • The Transboundary Haze Pollution Act — This statute provides for extraterritorial application[11] of investigative tools and evidentiary provisions to allow for the prosecution of companies and other entities, whether in or outside Singapore, as well as of persons holding positions of responsibility in these entities that are liable for causing and contributing to transboundary haze pollution[12] in Singapore.
  • The Organised Crime Act 2015 — This statute creates offenses against a mastermind located overseas, which initiates, coordinates and instructs the commission of criminal offenses by organized criminal groups in Singapore or recruits members for the same group.[13]

5.             Corporate liability in the case of transactions taking place after the commission of a crime (acquisitions, mergers, demergers, etc.)

Depending on how a transaction is structured, the buyer could, in some circumstances, come to own a company that is criminally liable for acts committed prior to the completion of the transaction. As a legal person, the target has the capacity to incur criminal liabilities, some of which may not have been properly disclosed to the acquirer.

As a result, the acquirer may inherit from the seller the following types of corporate liabilities of the target company:

  • Historic breaches of law and regulations that were committed pre-acquisition
  • Continuing corporate conduct by the target that triggers new compliance breaches post-acquisition
  • Potential infringement of accounting and financial reporting rules arising from post-acquisition consolidation of the target

Companies engaged in buy-side M&A activities should therefore ensure that any possible corporate criminal wrongdoing is considered part of the due diligence process or appropriate contractual mechanisms, such as indemnities, in order to protect the buyer from the repercussions of a criminal conviction of the target company.

Among the repercussions from corporate liability that the acquirer could face include the following:

  • Extensive “clean-up” costs
  • Impact to share price (for listed acquirers) and reputational damage
  • Loss of business due to the target’s business model being unsustainable, and possible exclusion from future government procurement contracts

II.            Applicable sanctions

1.             Type of sanctions applicable to the company

Penalties for companies convicted of criminal offenses can include fines and confiscation orders (ie, orders that the proceeds of any crime are confiscated). For instance, under the Corruption, Drug Trafficking and other Serious Crimes (Confiscation of Benefits) Act (Cap. 65A), Singapore courts can make a confiscation order against a defendant in respect of benefits that such defendant derived from certain criminal conduct. The court may also exercise its discretion and make victim compensation orders to compensate the victim of criminal conduct.[14] There is no exhaustive test for when the court will make such victim compensation orders, and this is generally decided on a case-by-case basis.

The Singapore courts are generally guided by statutory provisions prescribing the minimum or the maximum punishment for the offense, as well as by case law for the offenses committed in a similar manner. Courts generally adopt sentencing benchmarks as a guide, and may depart from such benchmarks as the facts of the case in question may require.

In particular, the Singapore High Court has prescribed a non-exhaustive list of factors to be considered in the context of corporate criminal liability. These factors include the following:[15]

  • The degree of contravention of the statute
  • The intention or motivation of the offender (ie, the company)
  • The steps taken by the company upon discovery of the breach and the degree of remorse shown by the company
  • Whether the company was merely an alter ego of its directors, with the general principle that deterrence should not be imposed twice (ie, on both the company and the sole shareholder)
  • Whether the company was a small family business with little resources, with consideration to the fact that an imposition of a heavy fine would be oppressive
  • Consideration of the community of interests that may be affected if a prohibitive fine is imposed on a company (including that of the shareholders, employees and creditors of the company)

In addition to penalties imposed on conviction of criminal offenses, certain Singapore legislations provide for certain enforcement action prior to, or absent, conviction. For example, the Organised Crime Act 2015 was passed[16] in recognition that criminals in the upper echelons of organized criminal groups often create many layers and elaborate structures to distance themselves from the criminal acts. Hence, it is not always possible to prosecute such criminals and secure a conviction beyond reasonable doubt. To effectively disrupt the activities of an organized criminal group and deny such criminals their ill-gotten gains, the Organised Crime Act 2015 provides for the issuance of organized crime prevention orders[17] and a civil confiscation regime.[18] Applications for these orders and for civil confiscation are heard in civil proceedings, which are separate from and independent of any criminal proceedings. This means that the application can still proceed even if the person has not been charged or has been acquitted.

2.             Interim measures, cease and desist orders, bans and confiscatory measures

Prior to trial, and depending on the specific offense and facts in question, the enforcement authorities may exercise certain powers in the course of investigations. These include: (i) powers of arrest; (ii) powers of search and seizure of documents and property (including premises, bank accounts, computers and decrypted information); (iii) power to compel the attendance of witnesses; and (iv) power to record statements.

3.             Liability of directors or managers for not having adopted (intentionally or negligently) measures for the prevention of the crime

There is no specific offense that a director or a manager will be liable for in cases of failure to adopt measures to prevent crime.[19] However, directors and managers may be prosecuted as individuals if they commit any criminal offenses, such as bribery and fraud, and they could also be liable for committing an inchoate offense.

In addition, a number of provisions apply individual criminal liability to directors or senior managers of corporations whose “consent or connivance,” “any act or default” or “neglect” is attributable to the criminal offense of the company.[20]

III.           Measures and “models” of prevention and effects of the same on corporate liability and applicable sanctions

Generally, the implementation of a crime prevention model does not remove criminal liability from a company, except when such measures may make it less likely that a criminal offense will be committed in the first place.

In certain cases, a company may rely on statutory defenses set out in the relevant and applicable legislation. In this respect, certain measures and models of prevention may possibly help to prove the relevant statutory defenses.[21]

Furthermore, in most cases, if a company can show that it took appropriate steps to reduce the risk that the offense would occur, then that may mitigate the seriousness of the offense and reduce any sentence imposed by the court.

IV.          Judicial proceedings to determine corporate liability

1.             Court competent to decide the liability of and penalties applicable to the company

All criminal proceedings save for certain cases, including those that potentially involve capital punishment or where the maximum imprisonment term exceeds 10 years, are heard at first instance in the State Courts of Singapore, which primarily comprise the District Courts and the Magistrate’s Courts.

The District Courts have the jurisdiction to try all offenses punishable by a maximum term of imprisonment not exceeding 10 years or which are punishable only by fines. The Magistrate’s Courts have the jurisdiction to try all offenses punishable by a maximum term of imprisonment not exceeding five years or which are punishable only by a fine.[22]

The High Court exercises appellate jurisdiction over decisions of the State Courts. Once the High Court has heard an appeal relating to a State Court’s decision, the convicted will only have certain limited avenues to obtain a Court of Appeal hearing. Examples of these avenues are criminal revisions, criminal references or criminal motions.

In cases where criminal proceedings are held at first instance in the High Court,[23] there is an avenue to appeal further to the Court of Appeal.

2.             Possibility of the application of interim measures

As noted above, prior to trial and depending on the facts of the case, prosecutors can exercise certain powers, including the powers of search and seizure of property, such as the search and seizure of bank accounts.

3.             Plea bargains and related effects on the corporate liability

As a matter of practice, defendants generally submit letters of representations to the public prosecutor to: (i) request for the discontinuation of proceedings; (ii) request for a Criminal Case Management System pre-trial meeting to discuss a possible plea; and (iii) make submissions to reduce the gravity of the charge as part of the plea bargaining process. The effect of such representations will depend on prosecutorial discretion.

Furthermore, Singapore has introduced a pre-trial voluntary procedure known as the criminal case resolution process, which is a neutral forum facilitated by a district judge for the prosecution and defense counsel to discuss and explore the possibility of an early resolution of criminal cases. A judge who handled the criminal case resolution process will not hear the case if the pre-trial resolution is unsuccessful.

Generally speaking, a plea of guilt can be taken into consideration in mitigating a sentence when it is motivated by genuine remorse, contriteness or regret, or a desire to facilitate the administration of justice.[24] The mitigating effect should also be compatible with the sentencing purpose(s) and principles that the sentencing judge is seeking to achieve and observe through the sentence.

4.             Imposition of sanctions against the company

If the company is found guilty, the judge will then pass sentence on the company using the applicable sentencing guidelines.

5.             Permanence of corporate liability if the crime is extinguished

There is no limitation period for the enforcement of criminal offenses. The limitation periods stipulated in the Limitation Act (Cap. 163) only apply to civil cases.

V.           Corporate liability in multinational groups

1.             Liability of parent companies located abroad in the case of offenses committed by directors, managers or representatives of the local company

Singapore law recognizes the concept of separate legal personality. Accordingly, a foreign parent company is not automatically held criminally liable for the criminal acts of its Singapore subsidiary or its directors or managers. In the same manner, a Singapore subsidiary is also not automatically held criminally liable for the acts of its overseas parent company. However, this is subject to the normal rules of attribution as set out above.

2.             Basis of liability and applicable sanctions

See above.

VI.          Significant case law concerning corporate liability arising from crimes and draft laws under discussion

1.             Significant case law, if any

As a former British colony, Singapore has inherited the English common law system. The Application of English Law Act (Cap. 7A) provided for a cut-off date (12 November 1993) for the continuing reception of the English common law. Since then, Singapore has retained common law roots but developed an indigenous legal system.

One of the most important cases in this area is the English case of Tesco Supermarkets Ltd v. Nattrass [1971] UKHL 1 as it is the leading case on the identification principle, which we discussed in detail above. This case has been followed by the Singapore courts in a number of cases, including the case of Tom-Reck Security Services Pte Ltd v. Public Prosecutor [2001] 1 SLR(R) 327.

2.             Proposed or contemplated new legislation

As of this writing, amendments to the Companies Act (which came into force on 31 March 2017) created the following new offenses:

  • Failure to keep a register of controllers
  • Failure to keep a register of nominee directors and controllers
  • Failure to surrender these registers to the Registrar or to government investigating officers
  • Disclosing any particulars contained in the registers to a member of the public

The Computer Misuse and Cybersecurity Act has recently been amended. To deal with the changing modus operandi with which computer offenses are carried out, the following new offenses will be introduced:

  • Use of software programs for unauthorized interception of a computer function
  • Use of personal information obtained by committing a computer crime
  • Making, supplying or using any item that is designed or capable of being used to commit a computer crime

The amended Computer Misuse and Cybersecurity Act will be given extraterritorial effect to allow enforcement action to be taken against any accused, or the computer, program or data, which causes serious harm in Singapore.

There are no other publicly available plans detailing any government initiatives with regard to the existing regime governing corporate liability.

[1] This note only considers the liability of companies under the general criminal law. It does not consider the regulatory environment in which companies in the regulated sector may operate, such as financial institutions and individuals regulated by the Monetary Authority of Singapore.

[2] However, some offenses are so-called “strict liability” offenses, which can be prosecuted without proof of mens rea.

[3] See Trade Facilities Pte Ltd & Ors v. PP [1995] 2 SLR 47.

[4] See Tom-Reck Security Services Pte Ltd v. Public Prosecutor [2001] 1 SLR(R) 327 at [17].

[5] Examples are corporate offenses under the Info-communications Media Development Authority Act 2016, SkillsFuture Singapore Agency Act 2016, Credit Bureau Act 2016 and the Government Technology Agency Act 2016, and recently amended Companies Act.

[6] See Tom-Reck Security Services Pte Ltd v. Public Prosecutor [2001] 1 SLR(R) 327 at [17]-[18].

[7] Section 52 of the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, section 69 of the Government Technology Agency Act 2016 and the new section 386AD of the Companies Act in force since 31 March 2017.

[8] For example, section 53(1) of the Personal Data Protection Act 2012 deems any acts done or conduct engaged in by an employee in the course of his or her employment to be treated as done or engaged in by both the employee and the employer, whether or not it was done or engaged in with the employer’s knowledge or approval; Executive Coach International Pte. Ltd [2017] SGPDPC 03.

[9] Section 2(1) of the Interpretation Act (Cap. 1) states that, unless expressly or impliedly provided otherwise in the statute in question, a “person” and a “party” include “any company or association or body of persons, corporate or unincorporated.” Section 11 of the Penal Code (Cap. 224) (Singapore’s main piece of criminal legislation) also provides that the word “person” includes any company or association, or body of persons, whether incorporated or not.

[10] See PP v. Taw Cheng Kong [1998] 2 SLR(R) 489.

[11] Section 4 of the Transboundary Haze Pollution Act 2014.

[12] Under the Transboundary Haze Pollution Act, haze pollution is said to have occurred if the 24-hour PSI remains at 101 or higher for 24 continuous hours or longer.

[13] For example, see section 6(2) of the Organised Crime Act.

[14] See Section 359(1) of the Criminal Procedure Code (Cap. 68).

[15] See Lim Kopi Pte Ltd v. Public Prosecutor [2010] 2 SLR 413 at [14] to [21].

[16] Second reading of the Organised Crime Bill by the Second Minister for Home Affairs, 17 August 2015.

[17] Section 15 Organised Crime Act 2015

[18] Section 61 Organised Crime Act 2015

[19] However, companies and individuals in the regulated sector may be required to have in place proper procedures. Otherwise, they may face regulatory sanction.

[20] For example, Section 20 of the Employment of Foreign Manpower Act (Cap. 91A) provides that if an offense committed under the statute by a body corporate is proven: (a) to have been committed with the consent or connivance of an officer of the body corporate; or (b) to be attributable to any neglect on his part, then the officer as well as the body corporate shall be guilty of the offense and shall be liable to be proceeded against and punished accordingly.

[21] See, for example, Section 33 of the Sale of Food Act (Cap. 283).

[22] Sections 7 and 8 of the Criminal Procedure Code.

[23] Offenses under the Penal Code (Cap. 224) are offenses listed to be triable in the High Court, as stipulated in the 7th Column of the First Schedule, Criminal Procedure Code (Cap. 68). Offenses under other laws are offenses specifically empowered to be tried under the law.

[24] See Angliss Singapore Pte Ltd v. Public Prosecutor [2006] 4 SLR 653.