Governance
The responsibility of Management
Did you know?
Corporate fraud is increasing dramatically worldwide. Nearly
half of businesses are affected. It is estimated that over one billion dollars
the amount of losses attributable to fraud in the United States in 2008. France
is experiencing the same loss ratio but the means employed are inadequate and
not commensurate with the risks involved.
The result is a significant growth in cases of proven fraud,
external, internal or collusive that end in conviction of the company and often
the Directors and Senior management.
The case of jurisprudence and defendants to personal
liability for executives are increasing for 3 years. The procedures are very
costly and very high fines. They may be subject to imprisonment.
In difficult economic times and faced with increasing
defendants managers, judges make a broad interpretation of texts relating to
the direct and induced the leaders of fact or law relating to fraud. The case
law clearly marks the conditions for such liability are rare and difficult to
enforce. It is therefore essential for managers to know the modes of activation
and best practices in use.
If their civil and criminal liability is involved, it will
be at a personal level, as corporate officers or directors of their company.
Their risk and management failures, real or imagined, are governed by the Civil
Code, the Companies Commercial Code and the Penal Code. They are punishable by
fines, damages and interest on their own property and imprisonment.
In view of the complexity of the subject and character
particularly large, it amounts to the Managers on basis of “de facto” and “de
jure”, to pursue all means in their power to fulfill their obligations in the
fight against fraud and guard against the direct involvement or induces its
responsibility to corporate officer.
Situations where the liability of directors is engaged in
fraud cases are numerous, given methods are legion. The manager may partially
cover his/her liability through insurance. It is almost impossible to do in
terms of criminal responsibility.
May be affected personally:
The managers of rights: directors (including
permanent representatives of legal persons), CEOs, general managers (and
assistants), funders or friendly liquidators.
The actual managers: employees regardless of job
title may be the de facto, rulers if they take management decisions in the
course of their duties. It is when the trial court decides whether the manager is
considered a "de facto” manager.
The functions most vulnerable to personal liability are:
The managers subject to transfer, selling a company or in changes of ownership: the responsibility of former executives may be sought
by the new management team. For demographic reasons, this phenomenon will
accelerate in the coming 5 years.
Leaders in the case of bankruptcy: there is the
multiplication of actions of passive filling. When running a company was found
guilty, the court may order the business leaders of the company to pay all or
part of the debts have been paid on business assets.
Civil and criminal liability, heritage displays and personal leadership The law assumes that the Manager is responsible for its
personal assets of the decisions taken in the course of his duties regardless
of legal status (Manager of SA, SAS, SARL, EURL SELARL or ...).
For example: in case of mismanagement, neglect or lack of
decision, fraud, misrepresentation or non-compliance with laws and regulations (tax,
social, environmental, etc..), No classic protection (employment contract,
statute or legal form of business liability of head of family, professional
liability or business) cover the manager when setting personal cause.
The CEO as well may be asked to enter all or part of their personal
assets to fulfill requests for repairs or even find themselves in debt. In
addition, if the officer is sentenced for insurance executives can not cover
willful misconduct, one of the main conditions of the fraud.
According to jurisprudence, there is willful misconduct
uninsurable since the one hand that we are dealing with a foul committed
intentionally, and secondly that the damage occurred as a result of this fault
has been sought, desired by the wrongdoer. This definition of the principle of
intentional misconduct is not without raising problems of interpretation in
court. Especially in the case of liability by implication because of the
carryover line employees to leaders and delegations of authority.
Finally, insurance policies of managers usually exclude
certain categories of risks, including claims based on facts, consisting of research,
by the insured or with his connivance, profit, remuneration or personal benefit
to which he had no legal right (assuming fraud and abuse of corporate assets).
Professional Liability and Managers complement each other
The Professional Liability may be incurred for professional
misconduct in the company: design errors, failure of the council and the lack
of care or failure in the recommendation.
The Civil Liability of Corporate Officer or Corporate
officers covers all officers: directors, general managers, directors, members
of the supervisory board, association presidents, leaders of fact, as is often
the CFO, legal or secretaries general: they can be challenged by an employee,
customer, shareholder, controlling body, a supplier or a government.
Criminal Liability of Managers.
Extending the scope of responsibility of the corporation,
recognized since 1994 and extended since 2006, does not preclude the criminal
responsibility of the individual can be prosecuted, concomitantly, for the same
practicality
In conclusion.
The Manager is primarily responsible for:
·
The people and assets which
he/she is responsible of
·
Justifying practical
measures to protect people and assets
·
Any proven misconduct will
be punished
·
His/her commitment of
loyalty
·
His/her duty of
transparency
To get an idea of a possible coverage of management liability, some insurers specialize themselves,
