UCL 2022-23 Lecture notes on Corporate Constitution: covering the Bibery Act 2010, Memorandum of Association (ultra vires doctrine, etc.), defining the corporate constitution and theory, and principles and statutory law in members' enforcement against the company
Bribery Act 2010.......................................................................................................................... 1
The individual offences: ss 1+2...............................................................................................1
Bribery of a foreign public official: s 6......................................................................................2
Corporate offence - failure to prevent bribery: s7....................................................................2
MOJ ‘Adequate Procedures’ Guidance: s 9.............................................................................3
Failure to prevent: a governance response.............................................................................4
The impact of enforcement?....................................................................................................4
What’s on the horizon?............................................................................................................5
Defining the Constitution..............................................................................................................5
Memorandum of association........................................................................................................6
Objects clauses + the ultra vires doctrine...........................................................................6
The articles of association...........................................................................................................9
The corporate contract.......................................................................................................... 10
Construing the contract......................................................................................................... 12
Enforcement.............................................................................................................................. 14
Company vs. members......................................................................................................... 14
Members vs. Company......................................................................................................... 15
Three principles in enforcing against the company:..........................................................16
Bribery Act 2010
Context to the Bribery Act:
● SFO investigation into al-Yamamah arms deal collapsed (2006)
● Identification doctrine rendered corporate prosecutions ‘extremely unlikely’ (DPP, Joint
Committee Report Vol II (n 29), BB48, Ev 273)
● OECD highly critical of UK’s implementation of OECD Convention on Combating Bribery
of Foreign Public Officials in International Business Transactions
● Draft Corruption Bill in 1995 – 15 years …
● Ultimately, ‘gold-plated’ international requirements – extending to private as well as
public companies
The individual offences: ss 1+2
● Here, we see our act covering private prosecutions and private bribery
● s1 – the Payer paying a bribe
○ (2) P “offers, promises or gives a financial or other advantage” and “intends to
induce a person to perform improperly a relevant function or activity”
○ (3) P “knows the acceptance of such financial or other advantage would itself
constitute the improper performance”
○ don’t pay bribes, and if you use a third party to pay bribes, you’ll still be
liable
● s 2 – the recipient receiving a bribe
, ○ R requests, agrees to receive or accepts a F/OA intending improper
performance
■ S 2(2): intending improper performance to follow (whether by R or
another)
■ S 2(3): where the request, agreement or acceptance itself amounts to
improper performance
■ S 2(4): as a reward for improperly performing the relevant function or
activity (by R or another)
■ S 2(5):
■ In anticipation of or in consequence of R requesting [etc] a relevant
function or activity is performed improperly by R or another person at R’s
request, assent or acquiescence”
○ S 2 (3)-(5): irrelevant that R knew performance was improper
Bribery of a foreign public official: s 6
● (1) It is an offence to bribe a foreign public official if P’s intention is to influence the FPO
in their capacity as a FPO
● (2) P must also intend to obtain or retain business or an advantage in the conduct of
business
● (3) Directly or through a third party
● UK plc at a disadvantage with these players
Corporate offence - failure to prevent bribery: s7
● Offence
○ Corporate liability if an associated person (s 8) bribes with the intention of
obtaining business for C (the Company)
■ s1 (making bribe); and
■ s6 (bribing FPO) only
■ no liability for failing to prevent the receipt of bribes (s2)
○ No need for AP to be prosecuted (s 7(3))
○ “associated person”: it can be an employee, subsidiary
● Defence
○ It is a defence if C had in place adequate procedures to prevent such
conduct
○ identification doctrine: removed the identification barrier, don’t need to ID a
directing mind and will. This is a strict liability defence. The mere act is sufficient,
and the burden of proof is on C to show they had adequate procedures in place.
■ Act trying to change corporate behaviour - to push proactive steps for
internal systems and controls. Internal analysis of where risk lay
, ■ The Act a radical departure at the time from how we recognize
corporations - it is a recognition of the bigger things we talk about; it’s not
enough to say that the company is liable if they act on their behalf
● Associated person (s 8)
○ A person who performs services for or on behalf of an organisation
○ Includes subsidiaries (s 8(3))
MOJ ‘Adequate Procedures’ Guidance: s 9
● Different drafts of this were received with mixed emotions.
○ Some argued “the section is deplorable and can be used to evade the act”
● But the Guidance sets out 6 principles to inform what constitutes adequate procedures
in any given instance.
○ Not commanding control, but “think about these principles yourself, apply them to
your own situation, recognising that it’s not a 1-size fits all approach”
● Guidance
○ Risk-based approach
○ Procedures to be informed by 6 principles – not prescriptive
○ Is it helpful?
○ Reflexive regulation
○ Use of hypothetical cases
● Principles
○ Proportionate procedures
■ Don’t need to adopt a “belt and braces” if it doesn’t apply to you
○ Top-level commitment
■ A cultural change: if the directors at the top aren’t committed, who is
reasonably expected to follow it?
○ Risk-assessment
■ “You undertake a risk assessment, you see what you need, are you in a
high risk industry, high risk jurisdictions etc.”?
■ Donovan: to respond to the fact that there was so much consternation to
the Act, really designed to lead w proportionality
○ Due diligence
■ If acquiring companies / entering new territory / engaging w 3rd parties
○ Communication (incl. training)
■ Must communicate Guidance to your team! No point if nobody knows
○ Monitoring and review
■ Not just periodically, but in response to any trigger event - acquisition,
new supplier
● Act a very new approach to corporate regulation: started to recognize that you
need to work out how to drive behavioural change in artificial people → drive
a governance response
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