The senior manager test: a brief reminder
The senior manager test, in force since 26 December 2023, provides that where a “senior manager” of a company or partnership commits a criminal offence while acting within the scope of their actual or apparent authority, the organisation itself commits the offence. A senior manager is anyone who plays a significant role in the decision-making, management or organisation of the company’s activities or a substantial part of them. The test looks at substance over form: it is not confined to board members or C-suite executives and extends to anyone whose role gives them genuine influence over a material area of the business. It is also not aligned with the FCA’s Senior Managers Regime, although the individuals caught will quite often overlap.
Importantly, the organisation will not necessarily avoid liability merely because it did not authorise the senior manager to commit the offence, or because the board or the senior manager’s line manager was unaware of the conduct. The key question is whether the senior manager was acting within the scope of their actual or apparent authority – for example, was the act of the type they were authorised to perform, or would ordinarily be undertaken by a person in that position? This is likely to be a fertile area for dispute.
In addition, unlike the previous ‘directing mind and will’ test, the individual is not required to have ‘full discretion to act independently of the board’ for corporate liability to attach.
At present, the senior manager test applies only to the economic crime offences listed in Schedule 12 to ECCTA which includes, e.g., bribery, fraud, money laundering, misleading the market, misleading the FCA or PRA and certain sanctions offences (see our previous article on this). s250 removes that limitation entirely.
It means that corporate liability could arise, for example, where a senior manager commits an offence relating to the environment, computer misuse, data protection, modern slavery, human trafficking, and health and safety. It also makes companies vulnerable to prosecution alongside their directors for late submission of accounts or other similar Companies Act offences. Some of these types of offences make sense, e.g. computer misuse would appear to be an offence that might be particularly likely to occur in a corporate context as the commission of the offence might be aimed at providing a business advantage to the corporate employer (and therefore to the employee too). One can see an argument for a company being ‘morally’ culpable for such an offence. However, there are some offences where this argument is more difficult. s250 therefore brings the question of whether a company should be held liable for all offences committed by its senior managers, even in circumstances where the senior manager is not in any way motivated by their duties to their employer or acting for or on behalf of the company, into much sharper focus.
Why the expansion of the senior manager test presents a different risk profile
s250 appeared to pass through the legislative process without any in-depth scrutiny. But its significance is amplified by three features which together create a materially different risk profile from the failure to prevent bribery/fraud regimes that many corporate compliance programmes are designed around.
- First, there is no reasonable or adequate procedures defence. Unlike the failure to prevent offences for bribery, facilitation of tax evasion and fraud, where an organisation can defend itself by demonstrating adequate compliance procedures, the senior manager test offers no such safe harbour. If the senior manager committed the offence whilst acting within the scope of their authority, the company will also have committed the offence and, absent any public interest arguments it can successfully make against prosecution, the company may well be prosecuted. The quality of the compliance programme does not provide a general defence to attribution under the senior manager test, although it may be relevant to any offence-specific defence, charging decision, public interest assessment and sentencing.
- Second, there is no requirement that the offence benefited the company. The senior manager need not have been acting in the company’s commercial interests. It is sufficient that they were acting within the scope of their authority. This means that conduct, which is entirely self-serving, or even contrary to the company’s interests, can still fix criminal liability on the organisation. It may be less likely, though, on public interest grounds that the company would be prosecuted where it is also a victim of the crime.
- Third, some criminal offences can be committed recklessly, not just intentionally. A senior manager who is aware of a risk and proceeds regardless may satisfy the mens rea threshold, and in doing so, fix criminal liability on the organisation.
The DPA gap
The expansion of corporate criminal liability under s250 has not been matched by a corresponding expansion of the Deferred Prosecution Agreement (DPA) regime. DPAs remain available only for offences listed in Schedule 17 to the Crime and Courts Act 2013, which are predominantly economic crime offences.
For the newly in-scope offences – such as environmental, health and safety, data protection, modern slavery and sexual offences, a corporate prosecution will proceed through the ordinary criminal courts, with no option for a negotiated DPA to avoid a conviction. This is likely to increase the administrative burden on an already stretched court system.
Personal liability for directors: “consent or connivance”
Any expansion of corporate criminal liability necessarily amplifies the personal risk for individual officers. Where a company is convicted of a criminal offence, “consent or connivance” provisions extend criminal liability to any director, manager or similar officer who consented to, or connived in, the offending, or to whose neglect it was attributable.
The Law Commission identified over a thousand legislative instruments creating this type of personal liability.1 With s250 lowering the threshold for corporate offending across a far wider range of conduct, the personal exposure of board members and senior executives where they know the material facts constituting the offence and have agreed (or it can be inferred they have agreed) to the conduct (for consent) or are aware of the offending conduct but fail to act to prevent it, or tacitly agree to it (for connivance), therefore increases.
Practical steps
Educate your boards and senior managers about this change, using real life examples of the sort of conduct that may impact your organisation.
A counsel-of-perfection approach, training every potential senior manager on every conceivable criminal offence, is plainly neither realistic nor proportionate. The more effective response is a targeted, risk-based assessment. Organisations should identify the areas of the business where senior managers have the opportunity and the motivation to engage in conduct that could constitute a criminal offence. For those areas, existing policies, training and escalation protocols should be reviewed and, where necessary, strengthened.
Role design also warrants review. The senior manager test looks at substance over form, but a role that is described in terms consistent with senior management responsibility will be more difficult to argue falls outside the definition. Organisations creating or restructuring roles could consider how the role description interacts with the statutory test.
A robust whistleblowing framework, clear escalation pathways and a genuine speak-up culture are not a legal defence to a charge under the senior manager test. But they are relevant to the prosecutorial public interest assessment and, more fundamentally, they are the most effective means of identifying and addressing risk before it crystallises into criminal liability.
Finally, in-house counsel and others involved with investigating misconduct involving a senior manager will want to factor in corporate criminal liability risk when making decisions concerning how, and by whom, an investigation is conducted. Rushing into an investigation without considering governance and legal safeguards around it is riskier than ever.
Ensuring that corporate compliance programmes keep pace with the expanding landscape of criminal liability was one of the key themes of our 2025 Cross-border White Collar Crime and Investigations Review.
Footnote
1 Law Commission Options Paper Corporate Criminal Liability June 2022 at footnote 294
