§702-227 Penal liability of corporations and unincorporated associations. A corporation or unincorporated association is guilty of an offense when:

(1) It omits to discharge a specific duty of affirmative performance imposed on corporations or unincorporated associations by law and the omission is prohibited by penal law;

(2) The conduct or result specified in the definition of the offense is engaged in, caused, authorized, solicited, requested, commanded, or recklessly tolerated by the board of directors of the corporation or by the executive board of the unincorporated association or by a high managerial agent acting within the scope of the agent's office or employment and in behalf of the corporation or the unincorporated association; or

(3) The conduct or result specified in the definition of the offense is engaged in or caused by an agent of the corporation or the unincorporated association while acting within the scope of the agent's office or employment and in behalf of the corporation or the unincorporated association and:

(a) The offense is a misdemeanor, petty misdemeanor, or violation; or

(b) The offense is one defined by a statute which clearly indicates a legislative purpose to impose such criminal liability on a corporation or unincorporated association. [L 1972, c 9, pt of §1; gen ch 1993]

Revision Note

In paragraph (1), "or" deleted pursuant to §23G-15.

COMMENTARY ON §702-227

Corporations and unincorporated associations (partnerships, unions, etc.) are a powerful part of contemporary society and their conduct, like that of individuals, ought to be subject to penal sanctions when it injures substantial social values and can be morally condemned. The common law originally found it difficult to impose penal sanctions on a corporation or an unincorporated association because the former was regarded as an artificial entity and the latter as a label for an aggregate of individuals and neither could form a requisite state of mind or be imprisoned. These "philosophical" difficulties have been swept away by imputing to the corporation or association the acts and mental culpability of its directors, managers, or employees and by utilizing fines as an appropriate alternative to imprisonment.

Subsection (1) provides for penal liability of a corporation or unincorporated association which (acting through its agents) fails to discharge any affirmative duty imposed by law upon it and enforced by penal sanction (e.g., a fine). Examples would be failure to comply with health or safety laws. Since the definition of "person" includes, where relevant, corporations and unincorporated associations, a corporation or unincorporated association could not be held penally liable unless, with respect to each element of the offense, it (through its agents) acted with the requisite state of mind. Penal liability of corporations or associations should not be imposed absolutely merely because imprisonment is not an available penalty.

Subsection (2) imposes penal liability for any prohibited conduct or result which is engaged in, caused, authorized, solicited, commanded, or recklessly tolerated by persons who represent the policy of the corporation or unincorporated association. Policy is obviously represented by the board of directors of a corporation and by the executive board (regardless of what proper name is used) of an unincorporated association. "High managerial agent" is defined in §702-229 and is used to denote those individuals whose conduct may be said to represent the policy of a corporation or an association.

Subsection (3) deals with conduct and results which are engaged in or caused by a person who is not a high managerial agent and which are not authorized by such an agent or by the board of directors or executive board. Corporate penal liability for conduct engaged in or results caused by an "agent" will result if the offense is a misdemeanor, petty misdemeanor, or violation, or if the definition of the offense shows a clear legislative purpose to impose felony liability on a corporation or unincorporated association for such conduct or results.

The phrase "in behalf of the corporation or unincorporated association" is intended to avoid imposing penal liability on a corporation or unincorporated association for the conduct of an agent who, though acting within the scope of the agent's employment, acts solely for the agent's own benefit. For example, a manager may falsify public documents to conceal the manager's own fraud on the corporation or association--certainly the corporation or association should not be held penally liable because the manager was acting within the scope of the manager's employment simpliciter.

The Code follows substantially the approach taken in New York[1] and proposed in Delaware,[2] except that the Code imposes liability on unincorporated associations along the same lines as that imposed on corporations. This treatment of unincorporated associations was suggested in part by the Model Penal Code.[3]

Although there is little law on the subject, Hawaii has recognized corporate penal liability. H.R.S. §712-3 (as codified prior to this Code) provided for collection of fines from corporations upon conviction; and at least two cases have resulted in criminal convictions of corporations for regulatory offenses.4

SUPPLEMENTAL COMMENTARY ON §702-227

An example of the failure of previous Hawaii penal law to cover situations involving unincorporated associations is contained in State v. Good Guys For Fasi, 56 H. 88, 528 P.2d 811 (1974). In that case, the court held that an unincorporated association, namely a political campaign committee, could not be prosecuted for failure to file certain campaign contribution reports when the statute providing the penalty for the failure related only to the candidate, an agent of the candidate, and the members of the committee acting on behalf of the candidate. The case does not preclude the possibility of an unincorporated association being held liable for a penal offense.

Section 702-227 clearly permits the imposition of penal liability on corporations and unincorporated associations but if the liability is based on the failure to discharge an affirmative duty of performance, the duty must be imposed on the corporation or association and the omission must be prohibited by penal law. See subsection (1).

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§702-227 Commentary:

1. N.Y.R.P.L. §20.20.

2. Prop. Del. Cr. Code §140.

3. M.P.C. §2.07. See also Prop. Pa. Cr. Code §207.

4. Territory v. Pacific Club, 16 Haw. 507 (1905) (selling intoxicating liquor without a license), and Territory v. Hilo Mercantile Co., 23 Haw. 409 (1916) (improper storage of explosives).