Proposed Legislation for Corporate Criminal Liability to be Transferred to Acquiring Companies in Merger and Acquisition Transactions

Mr Murali Pillai asked the Minister for Law whether the Ministry will consider introducing legislation that allows for corporate criminal liability for any act constituting an offence that is committed by an acquired company prior to a merger and acquisition (M&A) transaction to be transferred to the acquiring company where the acquired company becomes a shell company or dissolved after the M&A.

The starting point of our current approach is that each company is a separate legal entity and is thus not criminally responsible for the conduct of another. However, depending on the facts of each case, there are other principles that may be relevant. For example, a fraudulent transfer of property with the intention of preventing the property from being taken in satisfaction of a fine under a sentence that has been, or is likely to be, pronounced, may give rise to an offence under section 206 of the Penal Code, which is punishable with imprisonment of up to two years, a fine, or both. This could apply to both the individuals and companies involved in the fraudulent transaction, including the acquiring company.

To deter offences by those who are responsible for the company’s acts, the individuals involved in the acquired company may be held criminally liable for the offence. In some instances, this is reinforced by provisions which attribute the company’s criminal liability to its officers or controllers. For example, under section 32(2) of the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act, where a corporation commits an offence under the Act, the officers or individuals involved in management are also liable for the same offence if they, among others, ought reasonably to have known that the offence would be or is being committed and failed to take all reasonable steps to prevent or stop the commission of the offence. Such individuals can still be held to account, as their criminal liability is not affected by the merger and acquisition.

We will study these issues further. If the Member has any particular incidents that he has in mind, we invite him to share them with us.