Written by León Lanis V., Paralegal
A new law is set to come into effect in Chile with important implications for all companies operating in the jurisdiction – now is the time for companies to ensure their corporate governance is in order.
Last year, Congress approved the bill which modifies the Law 20.393, which introduced new principles to corporate law in Chile: the criminal liability of legal persons, specifically companies. Before this law, there was no legal principle in Chile to pursue criminal actions against companies, in the case of criminal activity, usually the victims or the Public Ministry sought actions against specific people. When Law 20.393 originally came into force in 2009, many companies had to rethink their corporate structure in order to comply better with this Law and be very aware of the corporate governance of their company, in order not to fall under the criminal sanctions prescribed by the new regulation.
How will the bill apply?
The idea of the bill is to introduce a wider range of criminal offences, in order to amplify the scope of actions a victim or the Public Ministry can pursue. But, for a company to be found liable of a criminal activity there must be certain conditions to be met:
- The offence was committed by a person within the company or by third parties which provide services, with or without, representation of the company;
- That the commission of the offence was favoured by the lack of effective implementation of an adequate prevention model.
Categories of offences
The new law will have 4 categories of offences. These are:
- Those which by nature are always considered corporate and financial crimes: this category is a broader one, because it considers any financial crime committed by a person or a third party on behalf of a company, a corporate crime. This includes, for example: collusion, stock manipulation, corruption, etc. There is an ongoing discussion as to whether tax crimes should be included in this category.
- Those committed in the exercise of a position or function within the company or for its benefit: this includes any crime made by the personnel of the company that either benefits him or herself thanks to his/her position within the company, or that the crime is committed in benefit of the company. This includes, for example: fraud, cyber-crime, falsification of public deeds, intellectual property theft, amongst others.
- Those committed by a Public Official where someone from the company is found involved in or benefited from the offence: this situation generally applies to bribery, tax fraud, unlawful disclosure of secrets.
- Those related to money laundering, terrorism funding, amongst others: this offence can be committed by action or omission. For example, a company can be found guilty, for example, of funding terrorism, either wilfully or by a lack of due diligence.
Prevention Models: to date, Law 20.393 forces companies to create a corporate structure sufficient to prevent crimes of this nature. The bill also includes that companies must regularly check their preventions models
Offences against the environment: one of the most innovative aspects of this bill is the creation of corporate criminal liability at the commission of environmental crimes, this includes:
- Failure to submit an activity to environmental assessment;
- Contravention to regulatory standards (I.e.: not following the assessment made by the Environmental Qualification Resolution);
- Giving false information in the of an environmental assessment;
In conclusion, we can see that the new bill has a wide scope and will force companies to rethink business models, adequate their operations to the new standards and constantly check and modify prevention models in order to comply with the aforementioned. Bear in mind, this new law adds around 200 crimes to the Criminal Code, all specifically aimed to corporate liability. This being said, the bill has been recently vetoed by the Government, making minor observations of the content of the approved bill, consisting basically of formal corrections in the redaction of the project. It is expected the bill will pass into law in the second half of 2023.