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Piercing the corporate veil

It’s unlikely to work out well:

The firms will be required to provide Ofcom with the name of a senior director who will be liable for criminal prosecution and jail sentences of up to two years if they fail to provide Ofcom with the information it needs to pursue an investigation.

Perhaps it might be OK right here, with social media companies. Perhaps it won’t be. But any longer term application of this – and this is indeed slippery slope – will lead to terrible problems. The entire point of having a corporation is that it is the corporation which is liable, not the individual.

Think on this for a moment. Someone at Facebook, in California, will have to be liable for Ofcom breaches with up to 2 years in jail. Everyone else follows suit – Italy, France, Indonesia, Iran and on and on. Difficult to get senior directors now, isn’t it?

18 thoughts on “Piercing the corporate veil”

  1. The corporate veil protects investors in a business not the management. This requirement for a senior director to be responsible does not sound that different from the requirements of Sarbanes-Oxley (SOX) for the CFO to sign off on the accounts, whereby they take responsibility for the truthfulness or at least the required level of process to escape legal liability.

  2. At least in the US, corp directors and officers may be held liable for any criminal act done by them for the corp. In several areas, (pollution stands out in my mind right now) a company must name the individual responsible for compliance matters ahead of time, and that person becomes the enforcement target, civilly and criminally.

    When the EPA sees a few compliance officers leaving a company, they know to start looking closely at that company.

  3. Bloke in North Dorset

    Construction Regulations have similar requirements for nominated people when it comes to H&S, I know, I’ve been that person on the client side.

  4. I recall the same thing being proposed when the H&S bandwagon started rolling. Somebody was nominated to be the Direct-Who-Faces-Jail-Time. He (not, usually, she) was no good at any actual Directoring, but he was competent to handle the chokey-cokey.

  5. Bloke in the Fourth Reich

    Here in the Reich, the German Democratic Socialist Party-led government is now openly censoring Telegram, by hotline to Google. No legal process, no law enables this, no legal remedy available.

    Within months, this could all be entirely decentralised. Serverless, blockchain and Tor-powered P2P fun with software produced by anonymous programmers. Who will they call to censor, or go to prison then? Surely the German Democratic Socialist Party can’t be intending on criminalising most of their sujbects?

  6. Take some diversity hire (“What do we want? Board representation for the sub-80 IQs!”) and give them the job.

  7. It’s easy for Facebook, they could nominate Nick Clegg. Or maybe appoint the Theranos girl as a director and nominate her.

  8. Or maybe appoint the Theranos girl as a director and nominate her.

    That’s a very good idea. Is there a legal requirement that directors are not already in jail?

  9. So this resident of California will be subject to UK law how? Send a gunboat?
    We cannot even prosecute a yank who killed a motorcyclist!

    Indeed, how will OFCOM establish that said director even exists?
    I predict a lot of M.Mouse & E.Presley directorships.

    Or if they must exist, find some dementia patient in a retirement home and name them: Joe Biden, for example.

  10. The designation DFI (Designated for Incarceration) has been a long standing joke when first informed that you’re being asked to be an officer or director of a corporation.

  11. Dear OFCOM,

    See those lines on the map? The ones you insist demarcate the Holy Land of the United Kingdom?

    Good. Pay heed, because you have f*ck all authority outside them.
    Now go warm a chair somewhere and put your edicts where the sun shineth not.

  12. @ Grikath
    They’ve seen them – for Pete’s sake they’re British not Yanks. These rules only apply to companies that want to operate in the UK.
    As to the rules themselves – I am less than happy as I trust bureaucrats slightly less far than I can throw them but as long as there has to be a jury trial and Ofcom would have to prove that the request for data was actually sent and received, there is a case to argue that private sector bureaucrats shouldn’t be able to get away with crimes.

  13. When I worked in the U.K. I was always clear that while I’d prepare the VAT return it was Director or CFO that got to sign it not me, f never sign a government form unless you really have no choice

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