I. Corporate liability deriving from criminal activity
1. Nature of the liability (criminal, administrative) and basis (crimes committed by directors or representatives, in the interest of or for the benefit of the company).
While Taiwan’s Criminal Code is silent on corporate criminal liability, other laws and regulations impose criminal liability on companies under certain circumstances based on the reasoning of “Dual Punishment” for criminal conviction of its employees, agents and representatives.
Moreover, in a precedent in 2007, particularly the Criminal Judgment of the Taiwan Supreme Court, TAI SHANG ZI Case No. 5520, the Taiwan Supreme Court held that despite the lack of criminal capacity, a company shall be criminally liable when a specific provision expressly regulates that corporations shall be punished. This means that dual punishment is warranted for both the company and its representatives.
Under specific regulations in Taiwan laws, when a representative, employee or agent of a company commits a crime, both the company and the representative shall be criminally convicted. For instance, when a company representative violates a particular employment regulation pursuant to Article 62 of the Employment Service Act, both the company and its representative shall be both criminally liable.
To sum up, corporate criminal liability is derived from specific regulations expressly imposing sanctions on the company under Taiwan laws. (Please see the specific regulations below in paragraph II.)
2. Type of crimes/administrative offenses from which, according to the legislation, corporate liability may arise
Corporate criminal liability arises if the following crimes are committed:
- Money laundering-related crimes: (1) Money laundering activity (Article 14 of the Money Laundering Control Act); (2) Collecting or providing property or interests through unjust methods (Article 15 of the Money Laundering Control Act); (3) Confiscation of assets or property interests (Article 18 of the Money Laundering Control Act)
Article 16 of the Money Laundering Control Act states that, in this kind of crimes, the legal person that the offender represents or works for shall also be fined.
- Tax evasion-related crimes: (1) Tax evasion (Article 41 of the Tax Collection Act); (2) concealment, under-reporting or under-collection of tax (Article 42 of the Tax Collection Act); (3) instigating or assisting an offender to commit this offense (Article 43 of the Tax Collection Act)
Article 47 of the Tax Collection Act states that the responsible person of a company is subject to penalties in place of the company in crimes related to tax evasion.
- Concerted action-related crimes: Actions where enterprises jointly determine the price, technology, products, facilities, trading counterparts or trading territory with regard to goods, services or any other behavior that restricts each other’s business activities, resulting in an impact on the market (Article 14, 40 of the Fair Trade Act)
- Financial statement fraud-related crimes: False statements on any account books, forms, vouchers, financial reports or other business documents (Subparagraph 4, 5 of Paragraph 1 of Article 174 of the Securities and Exchange Act)
Article 179 of the Securities and Exchange Act states that the responsible person of a company, serving as the substitute for the company, is subject to penalties under this act.
- Food safety-related crimes: Sanctions that may be imposed because of crimes related to food safety are as follows: (i) fines on the legal person (Article 49 of the Act Governing Food Safety and Sanitation); (ii) confiscation, indemnity or seizure of the assets or property interests of the legal person (Article 49-1 of the Act Governing Food Safety and Sanitation); and (iii) forfeiture, indemnity, provisional seizure or provisional disposition of assets or property interests of the food enterprise (Article 49-2 of the Act Governing Food Safety and Sanitation)
3. Identification of companies and entities to which liability may apply
Subject to applicable laws and regulations, criminal liability may be imposed on all types of legal persons, including a company, an association or a foundation, with the exception of public institutions such as government agencies.
4. Corporate liability for crimes committed abroad by its representatives or subsidiaries
Under Taiwan laws, no specific provision addresses the corporate liability of companies for crimes committed abroad by its representatives. Nevertheless, Article 7 of the Criminal Code broadly states that the Taiwan Criminal Code shall apply when national persons of Taiwan commit outside the territory of Taiwan offenses that are punishable by not less than three years of imprisonment, unless this offense is not punishable by the law in the place where the offense is committed. For this reason, in the event that the representative(s) of a company commits crimes that carry a sentence of not less than three years in another jurisdiction, this company may be criminally charged and convicted in Taiwan.
There is no regulation explicitly providing that a Taiwanese company shall be criminally liable for the conviction of its subsidiaries overseas.
5. Corporate liability in the case of transactions taking place after the commission of a crime (acquisitions, mergers, demergers, etc.)
- Transformations — A company, though transformed into a different type after the commission of a crime, shall continue to be liable for crimes committed before the date that the transformation became effective.
- Mergers — The newly combined company resulting from the merger shall be liable for any crimes committed by the merged companies. (Article 4 of the Business Mergers And Acquisitions Act)
- Demergers — In general, a demerged company shall remain liable for crimes committed before the date on which the demerger became effective, unless the demerged company will no longer exist.
II. Applicable sanctions
1. Type of sanctions applicable to the company
Under relevant Taiwan laws and regulations, the common sanctions used by the judicial authority for corporate criminal liability are as follows:
This is applicable to the following offenses: (i) false statements on any account books, forms, vouchers, financial reports or other business documents (Subparagraph 4, 5 of Paragraph 1 of Article 174 of the Securities and Exchange Act); (ii) tax evasion (Article 41 of the Tax Collection Act); (iii) concealment, under-reporting or under-collection of tax (Article 42 of the Tax Collection Act); and (iv) instigating or assisting an offender to commit this offense (Article 43 of the Tax Collection Act). The legal person that the offender represents or works for shall also be fined (Article 16 of the Money Laundering Control Act). Fines also apply to a legal person for crimes concerning food safety (Article 49 of the Act Governing Food Safety and Sanitation).
Seizure of assets or property interests
For crimes relating to food safety, the following sanctions apply: (i) confiscation, indemnity or seizure of the assets or property interests of a legal person (Article 49-1 of the Act Governing Food Safety and Sanitation); and (ii) forfeiture, indemnity, provisional seizure or provisional disposition of assets or property interests of food enterprises (Article 49-2 of the Act Governing Food Safety and Sanitation).
Confiscation or indemnity of the assets or property interests
Confiscation of assets or property interests is imposed for money laundering-related crimes (Article 18 of the Money Laundering Control Act). For crimes relating to food safety, either: (i) confiscation, indemnity or seizure of assets or property interests of a legal person (Article 49-1 of the Act Governing Food Safety and Sanitation); or (ii) forfeiture, indemnity, provisional seizure or provisional disposition of assets or property interests of food enterprises (Article 49-2 of the Act Governing Food Safety and Sanitation) applies as sanction.
Suspension or revocation of licenses or permits held by the company
Crimes relating to food safety are also punishable by the revocation of the food enterprises’ licenses (Articles 22 and 23 of the Health Food Control Act).
2. Interim measures, cease and desist orders, bans and confiscatory measures
Under the Taiwan Criminal Code and Criminal Procedure Law, the common interim measures adopted by judicial authorities during the prosecution and adjudication processes are seizure and confiscation.
3. Liability of directors or managers for not having adopted (intentionally or negligently) measures for the prevention of the crime
If the directors or managers intentionally or gross negligently did not adopt appropriate measures for the prevention of crime, it is likely that such an omission will constitute a breach of trust as provided for in Article 342 of the Taiwan Criminal Code, since such an omission will deem the directors or managers to be in breach of their fiduciary duty to the company.
III. Measures and “models” of prevention and effects on corporate liability and applicable sanctions
1. Consequences of the adoption of a compliance “model” and effects on corporate liability for crimes committed by the company’s managers, directors or representatives (cases in which it is possible to obtain an exemption from liability or a mitigation of the sanction)
Under Taiwan criminal laws, a due compliance model will not be a justification to exempt a company from criminal conviction. Specifically, no provision clearly provides that properly implementing compliance models may exempt or mitigate corporate liability for crimes committed by the company’s managers, directors or representatives. Likewise, no provision determines how effective a compliance model actually is, if implemented by a company. In a case concerning the criminal liability of a company, whether the company or the individuals in its employ comply with or violate the company’s internal rules or regulations will be considered irrelevant to a criminal court conviction in Taiwan.
Nevertheless, Article 57 of the Criminal Code stipulates that a sentence imposed on the offender shall be based on the specific liability and shall take into account all the circumstances in connection with this criminal commission, including the seriousness of the offender’s obligation violation. Similar legislations can also be found in the administrative area, such as Paragraph 1, Article 18 of the Administrative Penalty Act, which provide that in imposing an administrative fine, consideration shall be given to factors such as: (i) the culpability of the act in breach of duty under administrative law; (ii) the impact resulting therefrom; and (iii) the benefits gained from such an act. For this reason, it is likely that in individual cases, when assessing the criminal liability of a company, the criminal court will consider the seriousness of the offender’s violation, such as whether the company exercised due care and control, and the implementation of its compliance model in an effort to prevent a crime. The company’s criminal liability could be mitigated accordingly if deemed appropriate by the court.
2. Modality according to which a compliance “model” must be adopted in order to benefit from an exemption from responsibility or mitigated punishment (codes of ethics, procedures, etc.)
Taiwan criminal laws do not address this issue.
3. Monitoring: independent person or body to control/supervise, with the purpose of verifying the correct application of the “model”; mode of operation of such person or body
Taiwan criminal laws do not address this issue.
IV. Judicial proceedings to determine corporate liability
1. Court competent to decide the liability of and penalties applicable to the company
The Criminal Code has no rule that requires the joint prosecution and adjudication for both the individual offender and the company, but the decision to do so is legally left to the discretion of the prosecutor. As the criminal liability of a legal person is usually attributed because of the illegal acts of its representatives, employees or servants, the customary judicial practice in Taiwan usually dictates that the prosecution and conviction of the individual offender and the company for the same or related offense be carried out by the competent court in a joint criminal proceeding.
2. Possibility of the application of interim measures
Article 133 and 455-16 of the Code of Criminal Procedure provides that during the investigation stage or adjudication proceedings, following an application by the prosecutor and at the court’s discretion, the court may declare to seize any objects used for perpetrating a criminal offense, regardless of whether the seized asset belongs to either the offenders, the defendants or any third parties, such as the offender’s employer. In addition, gains derived from a criminal offense can also be confiscated on conditions similar with the confiscation. Thus, the court can order the owner, possessor or custodian of the property subject to seizure to surrender or deliver it. The seizure order can be revoked, and the seized property may temporarily be returned after a petition and the submission of an equivalent security bond by the owner, possessor or custodian when deemed appropriate by the collegial panel (Paragraph 2, Article 142 and Article 142-1 of the Code of Criminal Procedure).
3. Plea bargains and related effects on corporate liability
Under Taiwan criminal laws, a company is deemed to have no capability of will (mens rea), and thus, it cannot engage in a plea bargain agreement with the judicial authorities for a criminal charge against itself. Nevertheless, Taiwan criminal laws provide that in some specific circumstances, a company may be held criminally responsible for the illegal acts of its management, representatives, agents, employees or other servants if these illegal acts are conducted during the performance of their duties. Thus, in Taiwan court practice, a guilty plea by the individual offenders that: (i) have been convicted of a crime within the scope of the employment; or (ii) intend to reach a plea bargain agreement with the court will also result in the criminal conviction of the company.
4. Persistence of corporate liability if the crime is extinguished
Pursuant to the reasoning of Taiwan criminal laws, the state of a crime will persist until the state of the offense against the legal interest is entirely extinguished. Thus, if the offender’s illegal act has been finished but the offense still exists, the criminal conviction of the individual offender and the company will be deemed persistent, and the statute of limitations will not count until the state of the contemplated offense is entirely extinguished. In addition, court proceedings in Taiwan for the individual offender or the company can be concurrently pursued, and thus, it is infeasible for the accused company to argue that the accused or convicted individual offender is ineligible to be convicted due to, for instance, death or a lapse in the statute of limitations.
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
If parent companies or their directors have a direct controlling power over the operation and management of subsidiaries and if the criminal offense is perpetrated by the directors, managers or representatives of the local subsidiary, Article 8 of the Company Act shall apply and would result in the criminal conviction of the controlling parent company or its directors.
2. Basis of liability and applicable sanctions
Article 8 of the Company Act states that a non-director of a public company who, on a de facto basis: (i) performs the business of a director; (ii) controls the management of the personnel, financial or business operations of the company; and (iii) instructs a director to conduct business shall be liable for the civil, criminal and administrative liabilities as a director under the Company Act.
VI. Significant case law concerning corporate liability arising from crimes and draft laws under discussion
1. Significant case law, if any
In August 2014, Chang Guann Co. (“Chang Guann”), a Kaohsiung-based company, was found to have blended cooking oil with tainted oil and sold it to several major food manufacturers and restaurants. Thus, the panel found Chang Guann’s chairman and deputy general manager guilty of violations and offenses of aggravated fraud under the Act Governing Food Safety and Sanitation and, as such, sentenced them to four to five years in prison. In accordance with Article 49 of this food sanitation law, a company is held criminally responsible and faces a fine for the illegal act of adding contaminated oil by its management, representatives, agents, employees, or other servants if these illegal acts are conducted in the performance of their duties. As a result, Chang Guann was given a pecuniary fine of TWD 120 million. This decision is contained in Criminal Judgment of Kaohsiung Branch of Taiwan High Court, CHU, SHANG, CHUNG-SU Case No. 1, August 25, 2016.
In addition, according to the amendment made to the Criminal Code effective since 1 July 2016, which provides for the confiscation of the illegal proceeds from a criminal conviction, the Taiwan High Court further declared that Chang Guann’s total revenue of about TWD 81.5 million from the sale of tainted oil, without deducting operating cost and expenses related to the sale of tainted oil, shall be entirely confiscated.
2. Proposed or contemplated new legislation
An amendment to the provisions of the Criminal Code governing confiscation was passed by Taiwan’s Legislative Yuan on 17 December 2015, and came into effect on 1 July 2016. The new criminal law confiscation system is retroactive, allowing a confiscation order to be issued pursuant to the law prevailing at the time of judgment, instead of the time of the criminal act. This widens the scope of the persons subject to confiscation from a defendant to a third party and the objects to be confiscated, including illegal property, contraband, illegal funds and its conversion that is transformed therefrom.
During preliminary criminal investigations or trials over any individual, such as employees or agents of the company, the panel, under its discretion or following an application by the prosecutors, shall temporarily seize the illegal proceeds into court custody and confiscate the same, regardless of whether they belong to the offender, if there is substantial evidence that either of the following circumstances is met (Article 38-1 of the Criminal Code and Article 133-1 of the Criminal Procedure Code):
- The recipient, such as the company for which the offender worked, knowingly obtained the illegal proceeds from the offender.
- The recipient obtained the illegal proceeds from the offender for free or at a cost that is considerably not reciprocal.
- The recipient benefited from the illegal act committed by the offender.
In addition, other assets that may be seized under the new criminal law confiscation systems include: (i) the transformation of criminal proceedings into re-investment; (ii) luxury apartments, cars or diamonds bought; or (iii) the illegal transfer of funds to children or a registration under the name of a third person.
Moreover, even though it is not within the 2015 amendment, Article 38 of the Criminal Code states that, following substantial evidence to the panel, an object used by offenders or any third party, such as employees or agents of the company, in the commission of or preparation for the commission of an offense or an object derived from or acquired through the commission of an offense may be seized or confiscated.