Changes to economic criminal law. No more punishing managers for business risks

The Government is planning a thorough reform of commercial criminal law, aimed at eliminating the punishment of managers for taking justified business risks. In addition, there are plans to introduce new types of offences, such as breach of trust in commercial and private relations (draft Article 294a(1) and (2) of the Criminal Code), deliberately causing one’s own insolvency (draft Article 294e of the Criminal Code) or failing to disclose circumstances material to financial support (draft Article 286a of the Criminal Code).

These amendments will come into force once the legislative process has been completed and will be of crucial importance to board members, chief financial officers (CFOs), as well as investors and entrepreneurs operating in Poland.

Reform of economic criminal law: key changes for managers

The main aim of the reform is to move away from punishing managers for unsuccessful business decisions. Under the current legal framework, the line between a wrong business decision and the offence of mismanagement has often been blurred.

The amendment introduces the so-called ‘reasonable business risk’ clause. A manager who has taken a business decision within the limits of acceptable risk, based on reliable information (e.g. analyses, valuations, legal opinions) and in the company’s best interests, will not be subject to criminal liability – even if the transaction ultimately resulted in a loss for the company.

The draft also removes criminal liability for the mismanagement of the company’s assets in situations where such mismanagement did not result in any loss. Criminal liability in this regard will depend on the causing of actual financial loss of a significant value.

Additionally:

• A new offence of breach of trust will be introduced
• Only the exceeding of powers will be punishable, not the mere abuse of powers
• Decriminalisation of minor damage: Criminal and economic prosecution is to be focused on cases of genuinely large scale
• Increase in the threshold for property of significant value – from PLN 200,000 to PLN 500,000 – and the threshold for property of great value – from PLN 1,000,000 to PLN 2,000,000
• Protection of decision-making processes: It will be more difficult for law enforcement agencies to challenge commercial decisions taken in accordance with compliance procedures
• The prosecution of economic offences will depend to a greater extent on the will and initiative of the victim
• The importance of compensating the victim for the damage suffered will increase – the aim of criminal and economic proceedings will be to compensate for the damage, rather than merely to convict the perpetrator
• Full compensation for the damage by the perpetrator will result in a more lenient sentence

Who will be affected by the changes to economic criminal law?

The reform will directly affect:

• Members of the management and supervisory boards of commercial companies
• Operations directors, finance directors (CFOs) and senior managers,
• Entrepreneurs and business partners

How can you prepare your company for change?

To benefit from the protection that the new ‘reasonable commercial risk’ clause may offer, companies should implement appropriate procedures to safeguard their decision-making processes:

• Review of corporate procedures: Verify how key financial decisions are made and documented within the company.
• Implementation of compliance standards: Ensure that every material transaction is based on valuations, legal opinions or market analyses.
• Training for management on the safe management of asset-related matters and the documentation of business risks.

Criminal liability of managers: why is it important to document business decisions?

Failure to demonstrate that a decision was made based on reliable information and within acceptable risk limits may still expose managers to criminal charges in the event of a project or transaction failure. Therefore, it is crucial to properly document the decision-making process and exercise due diligence.

Properly developed compliance procedures help mitigate the risk of criminal liability and demonstrate that business decisions were made based on reliable information and risk analysis. Our law firm advises foreign-owned companies and their managers on compliance procedures, the assessment of criminal risk in transactions, and defense in cases involving economic crimes.

Would you like to find out how the planned changes to economic criminal law will affect your company and its management? Contact our experts in criminal law.