It's Out with the Old, in with the New: Corporate Crime has been Written in the Books!

Approximately a century later, after the old criminal code was issued in the Dutch-Indies era, a new Indonesian Criminal Code was enacted on January 2, 2023. A specific criminal law provision that has been recently added would be corporate crimes. It may be odd if we mention that corporate crime is an entirely new idea; however, for the first time, corporations can be held liable for committing a crime stipulated in the new criminal code as opposed to having to look at specified and scattered regulations such as environmental law or anti-corruption law.

The Old

Now you may start questioning, ‘so what does that have to do with my business?’ Well… before we answer that question, we shall stroll down memory lane.

Corporate crime is a difficult area to regulate, and this is due to the principle of asas societas delinquere non potest (a legal entity cannot be blameworthy). This is further bolstered by the fact that Article 59 of the previous Criminal Code mentions that only a natural person or individual can be responsible under the law. 

Furthermore, it is to be noted that corporate liability is scattered and are only accountable within particular laws and regulations. For instance, corporations are liable for anti-corruption law as stipulated in, Law No. 8 of 2010 concerning the Prevention and Eradication of the Criminal Act of Money Laundering. Another example is when corporations are held accountable in environmental law, as mentioned in Law No. 41 of 1999 concerning Forestry.

Hence, as there is an absence of regulations encapsulating the whole corporate crime liability, the Indonesian Supreme Court issued the Supreme Court Regulation No. 13 of 2016 on Procedures for Handling Crimes Committed by Corporations. The Supreme Court Regulation is used as a guidance to deal with the dispersed laws and regulations. Particularly, Article 4 stipulates that corporations can be held criminally liable in accordance with corporation provisions and relevant laws. Moreover, it adds that limited liability companies may be held liable if corporations obtain or benefit from a crime committed for corporate interests, corporations allow criminal acts to occur, and that corporations do not take necessary safeguards to prevent a larger impact and ensure compliance with applicable legal provisions to prevent occurring criminal acts.

The New

The sparkly new Criminal Code now has compiled the dispersed laws and regulations and place corporations as a subject to the Criminal Code. It acknowledges a corporation’s criminal responsibility, not only to the individuals within the corporation. Other than limited liability companies, the term ‘corporation’ encompasses foundations, cooperatives, state-owned and regional government-owned enterprises, civil partnerships, firms, and other equivalent forms of business entities.

In the new law, a crime is deemed to be committed by corporations if the unlawful act is committed by:

1. 1. management member that has a fully functional position within an organization’s structure; or
   2. any person that has a working relationship or any other relationship that acts for and on behalf of the corporation or acts in the interests of the corporation within the scope of business operations.

Notwithstanding the above, corporate crime is also deemed to have occurred if the unlawful act is committed by an individual outside the corporation who has control over the corporation or such individual is the corporation’s ultimate beneficial owner.

The new law further regulates unlawful actions shall be accounted committed by the corporations if the unlawful acts: 

1. 1. are included in the scope of business activity that is written in the articles of association or other articles that apply to the corporation;

1. 1. brings benefit to the corporation; 

1. 1. are accepted as corporate policy;

1. 1. the corporations are not taking the necessary steps to take precautions, prevent a greater impact, and ensure compliance with applicable legal provisions to avoid the occurrence of criminal acts; or,

1. 1. the corporations allow crimes to occur.

The accused corporation may be subject to both primary sanctions in the form of a fine, and additional sanctions, including dissolution of the corporation.

Everything in Between and Its Considerations

Well now, the question shall be asked. The new Criminal Code ultimately regulates corporate crime.  Business actors should now be aware that the new Criminal Code mentions that corporations themselves can now be held liable. Benefactors outside of the corporation that has control over the corporation as well can be held liable. 

Another point of contention would be Article 48(d), which explicitly mentions that corporations will be held accountable if the enterprises are not taking the necessary precautions. This Article allows us to presume that corporations may need to issue a policy to ensure they will comply with applicable legal provisions to prevent the occurrence of criminal acts.

The new criminal code will enter into force three years after its promulgation, and there is a high probability that there will be judicial review regarding the articles. Taking this opportunity, corporations must take the initiative by implementing new internal policies and regulations which ensure compliance with the law and good corporate governance policies.

By: Emir Pohan and Sharleen Abigail

DISCLAIMER:

This material is prepared for general information purposes only. It is not intended to give legal or any other professional advice, opinion or recommendation and, accordingly, it should not be relied upon. Specific legal advice should be sought before taking any action based on the contents in this material. Please contact us if you need any assistance regarding this matter.