SMEs urged to review risks as liability rules expand
Businesses face wider accountability under new criminal liability rules
The government’s drive to make companies more accountable for wrongdoing is moving beyond large corporates and into the SME sector.
New rules taking effect this month will make it easier to prosecute all sizes of companies and partnerships where senior managers commit criminal offences while carrying out their duties on the organisation’s behalf.
It means small and medium-sized businesses could find themselves on the front line for corporate criminal liability.
From 29 June 2026, Section 250 of the Crime and Policing Act 2026 will significantly expand the circumstances in which an organisation can itself be prosecuted. If a senior manager commits fraud, environmental offences, health and safety offences, regulatory offences or other crimes, while acting within the actual or apparent scope of their authority (including where third parties would reasonably believe the individual had authority to act on the organisation’s behalf), the company may also be found guilty of the offence and face prosecution.
Businesses are being urged to act before the legislation come into force, to review their governance and extend their risk management procedures. Importantly, legal experts warn that organisations should not assume the rules apply only to board directors or employees with “manager” in their job title.
Explained Mohammed Akram, corporate solicitor, “The definition of a senior manager is wider than many organisations may realise, as it can include individuals who play a significant role in managing part of the business or making important operational decisions, regardless of their formal title.”
The first step of any risk assessment will be to identify who may fall within the definition of a senior manager, particularly those with significant authority over financial decisions, regulatory compliance, procurement, contracts or operational management. Businesses can then review the controls, oversight and reporting structures that apply to those roles.
The reforms come hard on the heels of other recent corporate fraud reforms designed to address situations where businesses were able to distance themselves from criminal conduct carried out by individuals within the organisation, which had made prosecutions notoriously difficult.
The Economic Crime and Corporate Transparency Act 2023 expanded corporate criminal liability through the introduction of the new failure to prevent fraud offence. The Crime and Policing Act 2026 takes that concept much further, by significantly broadening the range of offences for which criminal liability may be attributed to an organisation.
And, unlike the failure to prevent fraud offence, which applies only to large organisations, the changes can affect businesses of any size, including small and owner-managed companies.
One of the key challenges is that there is no equivalent of the “reasonable procedures” defence that is available under some other corporate crime legislation.
“Having the right policies in place may not, by itself, provide protection if an offence takes place,” explained Mohammed. “The key is ensuring those policies are put into practice throughout the organisation and properly supported by effective oversight.”
For further information please contact Mohammed Akram 020 8221 8040 or on mohammed.akram@bowlinglaw.co.uk
This is not legal advice; it is intended to provide information of general interest about current legal issues.
