Criminal Liability of Legal Entities
In the past, legal scholars held differing views on the criminal liability of legal entities. Some believed that legal entities were incapable of committing crimes or that criminal punishment could not be imposed upon them.
Today, however, there is no longer any serious disagreement on this issue. For example, instead of capital punishment, the permanent dissolution of an institution may be imposed, and instead of imprisonment, temporary suspension of activities or similar sanctions may be applied.
In Iranian statutory law, relatively few explicit provisions address this issue. Pursuant to Article 568 of the Islamic Penal Code, with respect to the crimes outlined in Chapter Nine concerning the destruction of historical and cultural property, if legal entities commit such crimes, any managers or officials who issued the relevant orders shall, as applicable, be sentenced to the prescribed punishments.
According to Article 19 of the Check Issuance Law, where a check is issued by way of agency or representation on behalf of the account holder, whether a natural or legal person, both the issuer of the check and the account holder bear joint liability for payment.
Accordingly, enforcement measures and damage awards may be issued jointly against both parties. In addition, the signatory of the check shall bear criminal liability under the law unless it is proven that the non-payment resulted from the act of the account holder or a subsequent representative, in which case the individual who caused the non-payment shall be criminally liable.
Theoretical and Historical Foundations of the Criminal Liability of Legal Entities
Aside from the foregoing provisions, reference may be made to the Guild Affairs Law of 1972, which provides that in all cases where responsibility is imposed upon legal entities under the law, the managing director or responsible manager of the legal entity who issued the order shall be deemed the offender and shall be subject to the prescribed punishment.
Beyond such limited provisions, there has historically been no comprehensive statutory framework explicitly governing the criminal liability of legal entities within Iranian law.
In press-related offenses, both the author and the responsible editor are subject to punishment. This reflects a broader tendency within Iranian law to attribute criminal responsibility to natural persons acting on behalf of legal entities, rather than to the legal entities themselves.
Criminal Liability of Legal Entities under Iranian Statutory Law
The Iranian criminal justice system, before the enactment of the Computer Crimes Law in its specific sense and the Islamic Penal Code of 2013 in its general sense, did not expressly recognize the criminal liability of legal entities. Judicial practice likewise interpreted references to “persons” in criminal statutes as referring solely to natural persons. Nevertheless, even before the enactment of the 2013 Islamic Penal Code, and independent of the Computer Crimes Law, both pre-revolutionary and post-revolutionary legislation included instances in which criminal sanctions were imposed upon legal entities.
The legislator’s approach to criminal liability has not been uniform. In certain cases, responsibility and punishment are imposed directly on the legal entity itself, whereas in others, liability is attributed to natural persons, namely the legal entity’s managers or officials.
Among the most significant laws, both before and after the Revolution, that impose criminal liability directly upon legal entities are the following:
- The Commercial Code, which in certain provisions refers to the punishment of companies. For example, Article 220 of the Code provides for monetary fines against companies.
- Article 173 of the Constitution of the Islamic Republic of Iran establishes the Administrative Justice Court, which adjudicates violations committed by legal entities. Article 11 of the Administrative Justice Court Law, adopted on 4 February 1982, defines the jurisdiction of this court to include the review of complaints and objections raised by natural and legal persons against decisions and actions of governmental bodies, ministries, organizations, public institutions, state-owned companies, municipalities, revolutionary institutions, and affiliated entities.
- Article 4 of the Law on Medical, Pharmaceutical, and Food Regulations, adopted on 19 June 1924, refers to the closure of an institution as a sanction for violations committed by legal entities.
- Article 17 of the Governmental Discretionary Punishments Law, adopted on 14 March 1989 by the Expediency Council, refers to the imposition of fines as a form of criminal sanction upon legal entities.
- Article 15 of the Preventive Measures Law, adopted on 2 May 1960, provides for monetary fines and the closure of institutions as penalties for violations committed by legal entities.
Attribution of Criminal Liability to Natural Persons in Crimes of Legal Entities
Significant laws enacted both before and after the Revolution that attribute criminal liability arising from offenses committed by legal entities to natural persons include the following:
- Article 76 of the Guild System Law, adopted on 4 July 1980, provides that in all cases where responsibility is imposed upon legal entities by law, the managing director or responsible manager of the legal entity who issued the order shall be deemed the offender and shall be punished accordingly.
- Article 8 of the Law on the Translation of Books, Publications, and Audio Works, adopted on 27 December 1973, provides that where the offender is a legal entity, the natural person responsible for the decision giving rise to the offense shall compensate the private complainant from their personal assets.
- Article 109 of the Social Security Law, adopted on 4 July 1975, provides that where the employer is a legal entity, criminal responsibility shall attach to the company or to any other person whose act or omission caused harm to the organization or to insured individuals.
Frequently Asked Questions Regarding the Criminal Liability of Legal Entities
The criminal liability of legal entities refers to the imposition of criminal sanctions or legal responsibility upon companies, institutions, and other legal persons that commit offenses, in lieu of personal punishments applicable to natural persons.
While this issue was previously the subject of theoretical debate, it is now widely accepted that legal entities may commit crimes and be subject to sanctions, including temporary or permanent closure, monetary fines, and restrictions on activity.
Various laws, including Article 568 of the Islamic Penal Code, the Check Issuance Law, the Commercial Code, the Governmental Discretionary Punishments Law, and the Guild System Law, contain provisions addressing the criminal liability of legal entities or their managers.
Where an offense is committed by a legal entity, managers and officials who issued orders or played a decisive role in the commission of the offense may also bear personal criminal liability and be subject to legal punishment.
The criminal liability of legal entities is imposed on the company or institution itself and may include fines, closure, or restrictions on its activities. The liability of managers is personal and depends on their role and conduct in relation to the offense.
Yes. Pre-revolutionary laws, such as the Medical and Pharmaceutical Regulations Law and the Preventive Measures Law, as well as post-revolutionary legislation, such as the Islamic Penal Code and the Computer Crimes Law, have recognized various forms of criminal liability for legal entities and their managers.
Sanctions may include temporary or permanent closure of the institution, monetary fines, restrictions on activities, and, in certain cases, joint liability of managers alongside the legal entity. What is the criminal liability of legal entities?
Can legal entities commit crimes?
Which laws in Iran recognize the criminal liability of legal entities?
How is the criminal liability of managers applied in offenses committed by legal entities?
What is the difference between the criminal liability of legal entities and that of managers?
Have Iranian laws before and after the Revolution addressed the criminal liability of legal entities?
What types of sanctions may be imposed on legal entities?
Can a company be held criminally responsible even if only one manager committed the offense?
In some jurisdictions, yes. A legal entity may face criminal liability if the offense is sufficiently connected to the company and was committed by someone acting on its behalf or for its benefit. The applicable legal standards and the facts of the case determine whether corporate liability arises.
If the employee acted completely on their own, can the company still be charged?
Not necessarily. A key issue is whether the employee was acting within the scope of their authority or for the benefit of the company. If the conduct was entirely personal and unrelated to the business, the legal outcome may be different. Each situation requires a careful review of the facts.
Can both the company and the individual be prosecuted for the same crime?
Yes, that is possible in many legal systems. Holding a legal entity responsible does not automatically prevent authorities from pursuing criminal proceedings against the individuals who were personally involved. Whether both are liable depends on the applicable law and the available evidence.
What kinds of penalties can a company actually receive if it’s convicted?
The available penalties vary by jurisdiction. Depending on the law, they may include substantial fines, restrictions on business activities, confiscation of assets, or, in some cases, dissolution of the legal entity. The specific sanctions depend on the offense and the governing legal framework.
Does having a compliance program help if something goes wrong?
A well designed compliance program may be an important factor when authorities evaluate a company’s conduct. While it does not automatically eliminate liability, it can be relevant in assessing whether the business took reasonable steps to prevent criminal misconduct. The effect depends on the applicable law and the specific circumstances.
Can a nonprofit organization also face criminal liability?
Potentially, yes. Criminal liability is generally linked to the legal status of the organization and the applicable legislation, rather than whether it operates for profit. The analysis will depend on the nature of the alleged offense and the governing law.
If a company changes its name after an investigation starts, does that affect the case?
Simply changing a company’s name does not usually resolve issues relating to potential criminal liability. Authorities generally look at the legal identity of the entity and the underlying facts rather than its current branding. The effect of any corporate restructuring depends on the circumstances.
Can a foreign company be prosecuted for crimes connected to business activities in another country?
In some situations, yes. Jurisdiction over foreign legal entities depends on the applicable criminal laws, the location of the alleged offense, and other jurisdictional factors. Cross border cases often involve additional legal complexities that should be assessed individually.
Can shareholders be personally responsible if the company is found guilty?
Not automatically. Criminal liability of a legal entity does not generally extend to shareholders solely because of their ownership interest. However, individuals who personally participated in or directed unlawful conduct may face separate legal consequences depending on the facts.
What should a company do first if it learns that one of its executives may have committed a crime?
The appropriate response depends on the circumstances, but preserving relevant records, conducting an internal review, and obtaining legal advice promptly are often important first steps. Every situation is different, and decisions should be made based on the specific facts and the applicable legal requirements.