Deferred prosecution agreements – Directors being hung out to dry?

Deferred Prosecution Agreements ("DPA") have been used in the United States for many years.  DPAs allow companies to take certain steps (either by way of reparation or ensuring that certain offences are not repeated) during a supervisory period and the trade off is that the company and/or the directors will not be prosecuted.  Following the expiry of this period no further action is taken.  DPAs are now to be found in UK law in Schedule 17 of the Crime and Courts Act 2013 ("CCA 2013"), although as of this date this Schedule is still not yet in force.

DPA's envisages either the Director of Public Prosecutions or the Serious Fraud Office taking action against corporate bodies and in doing so will consider (amongst other matters) the following:

  • The nature and seriousness of the offence
  • The breadth of the wrongdoing
  • The seniority of the individuals involved in the wrongdoing
  • Any losses to third parties

Unlike in the United States, the judicial authorities will have oversight of the procedure and will therefore be required to review and approve any such "deals".

So, what does this mean for directors and officers?  In the United States directors and officers are included in a DPA. In the UK directors and officers cannot be part of a DPA. 

Therefore, it is conceivable that a company will plead guilty to various misdemeanours and be required to take restorative/reparatory steps, but that directors and officers will not receive the benefit of these concessions.  Thus, directors and officers may well be placed in an invidious position whereby a company pleads guilty to certain offences (some of which may be caught by the Financial Services and Markets Act 2000) and not receive the benefit of any DPA and yet may be prosecuted on the basis of the company's plea. 

Directors and officers would face an uphill struggle when seeking to show that they are not guilty of the offences to which the company had pleaded guilty.  And another possibility – whilst the directors may be the controlling minds of the company, if they fail to enter into a DPA (which might benefit the company) then might the shareholders have a view as to the benefit of a DPA?

Whilst the suggestion is that there will be approximately 10 DPAs entered into per annum (it is not clear where this figure comes from), nevertheless the potential liabilities for directors and officers would appear to be significantly exacerbated.



John Barlow's picture

John gives advice to insurance and reinsurance companies of Financial Institutions in connection with a range of insurance product lines, including fidelity, computer crime, Directors' & Officers', Professional Indemnity PI/Civil Liability and Cyber liability insurance programmes, and on claims that arise under these products.

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