CMS Expert Guide To Mandatory Reporting Of Criminal Offences For Companies And Their Responsible Persons in Czech Republic

Under Czech law, certain criminal offences must be reported if someone becomes aware of them. These offences include violent crimes, property crimes, economic crimes, crimes against state security and public order, corruption offences, and crimes against humanity and war crimes. Exceptions to the reporting obligation include situations where reporting would endanger the informant or a close person (the “defences”), as well as cases where a lawyer, clergy, or a person providing assistance to victims learns of the crime in the course of their professional duties (the “non-reportable persons”), but NOT persons contractually obliged to maintain confidentiality.

Section 368 of the Act No. 40/2009 Coll., the Criminal Code (the “Criminal Code”), contains the list of criminal offences that must be reported.

Companies can be prosecuted for failure to report a crime if the conditions of attributability are met, such as the offence being committed for the benefit of the company or in the course of its activities.

The offence can be reported by anyone within a legal entity having knowledge of it.

However, in practice, liability is based on the so-called principle of attribution (§ 8 of the Act on Criminal Liability of Legal Entities and Proceedings Against Them). This principle states that the actions of certain natural persons may be attributed to the legal entity if they occurred in its interest or within the scope of its activities.

These persons include:

• A statutory body or its member (e.g. managing director, member of the board),
• A person in a managerial position who is authorised to act on behalf of the legal entity,
• A person performing managerial or supervisory activities (e.g. member of the supervisory board),
• An employee or another person who acted based on the decision or approval of the above-mentioned individuals.

Therefore, if any of these persons is aware of a criminal offence committed for the benefit of the legal entity and takes no steps to report or prevent it, their inaction may be attributed to the legal entity.

The criminal offence is reported by filing a notification (no specific form) with the public prosecutor's office or with the police (or a soldier to their superior).

Failure to report a criminal offence may result in criminal liability and prosecution. If a person in a company (e.g., director) fails to report a crime they are aware of, and that crime benefits the company, this inaction may be attributed to the company.

The court may impose following sanctions to the company:

• fine of between CZK 20,000 (approx. EUR 800) and CZK 1,460,000,000 (approx. EUR 58,400,000),
• forfeiture of assets,
• punishment of disqualification,
• or a punishment of prohibiting on the performance of public procurements, participation in public competitions and accepting grants and subsidies.

A natural person may be sentenced to imprisonment, house arrest, community service, forfeiture of assets, a fine, forfeiture of thing or assets, disqualification etc. In addition to imprisonment of up to 3 years, the court may impose a lower sentence if the law provides for a lesser sentence for the unreported offence. It is also possible to impose a more severe sentence (for organised crime groups).

There are also risks of a reputational damage, a risk of retaliation, internal tensions, or negative impact to day-to-day business activity.

The risks of reporting differ based on the nature of the offence:

• By the company
• By a third party

4.1 By the company

The major risks are criminal liability of the company and failing to notify without delay.

This is interpreted as "at the earliest opportunity to notify". If a person fails to do so, the criminal offence is triggered, even if the delayed notification still led to effective action against the offender. Active repentance comes into consideration as well as extenuating circumstances.

Providing false information when reporting a criminal offence can qualified as perjury under Section 345 of the Criminal Code or defamation under Section 184 of the Criminal Code.

Again, there are risks such as a reputational damage, a risk of retaliation, internal tensions, or negative impact to day-to-day business activity.

4.2 By a third party

There are no risks regarding reporting of criminal offence commited by a third party. There might be only requirement to testify, provide information or cooperate with relevant authorities upon demand.

Accessory criminal liability (in Czech účastenství na trestném činu) can apply to both legal entities (companies) and individuals within them, depending on their role in the commission or concealment of a criminal offence.

When Accessory liability applies:

To individuals:

If a manager, board member, or employee helps to commit, cover up, or fails to report a crime, they may be held individually criminally liable as an accomplice or for failure to act (Section 367–368 Criminal Code).

To companies:

A company may be held accessorily liable if:

• It benefits from the crime,
• It fails to prevent the crime despite having the ability to do so,
• It facilitates the crime through its structure, lack of controls, or by tolerating the conduct.

Once a criminal offence has been committed, assisting or aiding the perpetrator is prohibited and punishable under other Sections of the Criminal Code. 

DISCLAIMER: Pursuant to Section 367 of the Criminal Code, failure to prevent a crime is attributable to a company and is superior to the failure to report (e.g. tax related crimes etc.)