Business Compliance

Introduction

After the initial idea for a business you can't even begin to think about planning without knowing if you need licenses, what type of company you will form, or where you can put it without making sure it is compliant with all of the rules and regulations.

As your company grows so does the need for expanded compliance.

COMPLIANCE as defined, is simple, it's MAKING SURE YOU FOLLOW THE RULES… What is not that simple is the interpretation and creation of the rules.

The other reason why compliance is so important is LITIGATION, whether it be ensuring that it does not occur by following regulatory compliance, or by providing evidence that all necessary and reasonable actions were taken in order to prevent an incident. This relates to everything, from lawsuits to criminal investigations.

What is Compliance?

Compliance is either a state of being in accordance with established guidelines or specifications, or the process of becoming so. Software, for example, may be developed in compliance with specifications created by a standards body, and then deployed by user organizations in compliance with a vendor's licensing agreement. The definition of compliance can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation.

Compliance is a prevalent business concern, partly because of an ever-increasing number of regulations that require companies to be vigilant about maintaining a full understanding of their regulatory compliance requirements. 

Business Compliance Requeriments (I)

Business compliance requirements fall into two categories:

internal and external.

INTERNAL REQUIREMENTS are actions that must be taken within the corporation or limited liability company by the directors and shareholders or members and managers, respectively. Although they are the most commonly overlooked, internal requirements must be documented as part of company records. It may be necessary to present these records when selling the company or in the event of a lawsuit.

EXTERNAL REQUIREMENTS are imposed by the state in which your business is incorporated and any state where it is registered to transact business (has undergone foreign qualification). State compliance requirements often include an annual report and the payment of a corresponding state fee.

Business Compliance in Spain

Since last 2015, a new legal framework in Spain finally installs CRIMINAL LIABILITY FOR CORPORATIONS if they cannot prove they had a coherent compliance program in place when being investigated for a concrete offense. 

The Spanish Criminal Code has been reformed significantly and introduces the regime of corporate compliance with article 31bis. Other articles are new or updated.

So, the Spanish law includes the following elements:

Identification of activities where crimes could be committed (Risk assessment)

Well-defined decision-making processes using protocols and procedures.

Adequate financial management procedures to prevent those crimes from being committed inside the organization.

Need for internal prevention mechanisms and channels in order to reduce or avoid potential criminal liability for companies or their representatives (Whistleblowing channel).

Sanctions to punish acts of non-compliance.Obligation to periodically verify the model and manage changes as and when necessary according to new facts or developments, controls or management structures.

Business Compliance in Spain (II)

The last version of the Spanish Criminal Code was approved by the Spanish Congress on March 26, 2015, and scheduled to take effect on July 1st, 2015. 

Since then, company’s directors are LEGALLY OBLIGATED to adopt a COMPLIANCE PROGRAM and the program must be supervised by a body or individual authorized to exercise high-level control. 

The amended code provides companies with an exemption from criminal liability for crimes committed by their officers or employees, provided the company meets certain requirements set forth under the new law. Specifically, Article 33 of the amended code exempts companies from criminal liability under the following conditions:

1.- The directors have adopted a compliance program that meets the legal requirements under Spanish law.

2.- The supervision of the program is entrusted to a company´s body or individual (i.e., a lawyer) with authorized powers of initiative and control (Compliance Officer).

3.- The officers or the employees have committed a crime by intentionally violating the compliance program, and…4.- The Compliance Officer did not neglect its duties of supervision, oversight and control.

Business Compliance in Spain (III)

The Spanish Criminal Code also lists (article 33 bis 5) SIX KEY ELEMENTS THAT A COMPLIANCE PROGRAM MUST INCLUDE in order to insulate a company from criminal liability (the company must provide that the compliance program has been adopted before the crime was committed by any of its officers or employees): 

Risk assessment,

Standards and controls to mitigate any criminal risks detected,

Financial controls to prevent the crimes (i.e., money laundering)

Obligation to report to the Compliance Officer any violations of the standards and controls,

Disciplinary system to sanction violations of the compliance program by officers and employees, and

Periodic review of the compliance program, making the necessary adjustments when serious violations occur or when the company undergoes organizational, structural or economic changes.
An interesting feature of the mentioned article 33: it goes further than other countries have gone with their corporate compliance defenses in that it actually mandates specific features that compliance programs must contain in order to avoid companies criminal liability. 

Business Compliance in Spain (IV)

Since the Spanish Criminal Code requires an EFFECTIVE COMPLIANCE PROGRAM, companies will also need to demonstrate that their officers and employees have received proper TRAINING. 

The 2015 Spanish legislation now places great weight on effective compliance programs, following the global trend toward mandating compliance programs reflecting core elements for such programs. 

Additionally, much like in the U.K., the recent Spanish legislation is designed to provide an affirmative compliance defense for companies that can demonstrate the six elements (none are optional) of an effective compliance program described in the new law.