What Is Secondary Liability for Corporate Crimes?
Introduction
Corporate violations are not always committed solely by the corporation or by the individual who performs the prohibited act. A person who commands, induces, assists, or causes the violation may also face personal liability under Philippine corporate law.
Section 172 of the Revised Corporation Code establishes secondary liability for persons who aid or abet violations of the Code, its rules, regulations, or orders of the Securities and Exchange Commission. The provision is significant because it prevents individuals from avoiding responsibility by acting behind a corporation, an officer, or another principal offender.
Governing Law: Section 172 of the Revised Corporation Code
Section 172 of R.A. No. 11232, or the Revised Corporation Code of the Philippines, applies to anyone who willfully participates in a violation by aiding, abetting, counseling, commanding, inducing, or causing its commission.
The provision states that a person who performs any of these acts may be punished with a fine not exceeding the fine imposed on the principal offender. The court determines the proper amount after considering the person’s participation in the offense.
Accordingly, the liability of an aider or abettor is not automatically identical in amount to that of the principal offender. The statutory ceiling is the fine imposed on the principal, while the actual fine depends on the offender’s participation and the court’s assessment.
Section 172 provides:
“Anyone who shall aid, abet, counsel, command, induce, or cause any violation of this Code, or any rule, regulation, or order of the Commission shall be punished with a fine not exceeding that imposed on the principal offenders, at the discretion of the court, after taking into account their participation in the offense.”
Section 172, R.A. No. 11232.
Who May Be Liable?
Section 172 is broad enough to cover persons who are not formally designated as directors, trustees, officers, or employees of the corporation. Liability may extend to an individual who intentionally contributes to the violation even if that person does not hold a corporate position.
Potentially liable persons may include:
- corporate officers who direct an unlawful transaction;
- employees who knowingly assist in carrying out the violation;
- shareholders or other persons who command corporate personnel to commit the prohibited act;
- professional advisers who intentionally induce the corporation to violate the Code; and
- third parties who knowingly cause or substantially assist the violation.
Liability, however, does not arise merely from a person’s relationship with the corporation. The prosecution or complainant must establish the person’s participation in the prohibited conduct and the connection between that participation and the corporate violation.
Acts Covered by Section 172
Aiding and Abetting
A person aids or abets when he or she knowingly provides assistance that contributes to the commission of the violation. The assistance may consist of supplying documents, resources, access, instructions, personnel, or other support necessary or useful to the unlawful act.
Mere presence, employment, or membership in a corporation is not sufficient. The evidence must show a conscious and meaningful contribution to the violation.
Counseling
Counseling refers to advising or recommending that another person commit a prohibited act. Advice alone may be insufficient where it is general, tentative, or unrelated to the actual violation. It becomes legally significant when it is given with knowledge of the unlawful conduct and contributes to its commission.
Commanding
Commanding involves the exercise of authority or influence to direct another person to commit the violation. A superior may not avoid responsibility by ensuring that an employee physically performs the act. If the superior’s directive caused the violation, Section 172 may apply.
Inducing
Inducement exists when a person persuades, influences, or causes another to commit the offense. Philippine criminal law recognizes that a person who directly forces or induces another to commit a crime may be a principal by inducement.
In People of the Philippines v. Janjalani, G.R. No. 188314, 16 April 2011, the Supreme Court explained that inducement must be sufficiently influential and essential to the commission of the offense. The command or advice must be of such a nature that, without it, the crime would not have materialized.
Although Section 172 concerns violations of the Revised Corporation Code and related Commission rules or orders, this doctrine helps explain why a person who deliberately causes another to commit an unlawful act may incur personal liability.
Causing the Violation
A person may be liable when his or her conduct directly brings about the violation, even if the person did not personally execute the final act. The inquiry is whether the person’s conduct was a substantial and intentional cause of the prohibited corporate act.
Requirement of Personal Participation
Corporate office alone does not establish criminal or regulatory liability. The relevant question is not simply whether the accused was president, director, manager, or employee, but whether the person performed an act connected with the particular violation.
In Valenzona v. People of the Philippines, G.R. No. 248584, 13 March 2023, the Supreme Court held that criminal liability cannot rest solely on the accused’s title. The prosecution must prove the officer’s direct and active participation or establish that the officer had the power and responsibility to prevent the prohibited act.
Similarly, in ABS-CBN Corporation v. Gozon, et al., G.R. No. 195956, 10 March 2015, the Court emphasized that mere membership in a board or status as president does not by itself prove knowledge, approval, or participation in a criminal act. Active participation must be shown; constructive participation is not enough.
These principles mean that Section 172 should not be applied mechanically to every person associated with the corporation. The evidence must establish an intentional or knowing contribution to the violation.
Relationship Between Sections 171 and 172
Sections 171 and 172 address related but distinct forms of corporate liability under R.A. No. 11232.
| Provision | Persons Covered | Basis of Liability |
|---|---|---|
| Section 171 | Directors, trustees, stockholders, members, officers, employees, or other responsible persons | Responsibility for the corporate violation or indispensability to its commission |
| Section 172 | Any person who aids, abets, counsels, commands, induces, or causes the violation | Knowing or intentional participation in the violation |
Section 171 permits the court, in appropriate cases, to impose the penalty upon the corporation and upon the individuals responsible for the violation or indispensable to its commission. Section 172 separately addresses persons who assist or cause the violation, including persons who may not otherwise fall within the corporate positions identified in Section 171.
The same conduct may potentially fall under both provisions, depending on the person’s corporate role and the evidence of participation.
How the Fine Is Determined
Section 172 does not require that the aider or abettor receive the exact same fine imposed on the principal offender. It provides that the fine must not exceed the fine imposed on the principal and leaves the final amount to the court.
In determining the penalty, the court may consider the person’s:
- level of participation;
- authority or influence over the principal offender;
- knowledge of the violation;
- role in planning or executing the act; and
- benefit obtained from the violation.
Thus, the phrase “same fines as the principal offender” should be understood as establishing the maximum allowable fine, not as imposing an automatic identical penalty in every case.
Corporate Crimes and Other Statutes
Section 172 applies specifically to violations of the Revised Corporation Code and to violations of rules, regulations, or orders of the Securities and Exchange Commission. Other statutes may contain their own provisions on individual or secondary liability.
For example, Section 253(b) of the National Internal Revenue Code provides that a person who willfully aids or abets the commission of a tax crime is liable in the same manner as the principal. In addition, Section 253(d) identifies responsible persons in associations, partnerships, and corporations who may be subject to penalties for tax violations.
Under Section 51.5 of R.A. No. 8799, or the Securities Regulation Code, a person who substantially assists an act or omission of a primarily liable person, with knowledge or reckless disregard that the act or omission is wrongful, may be jointly and severally liable as an aider and abettor for resulting damages.
These provisions should not be conflated. The applicable statute depends on the nature of the violation, the authority involved, and the elements required by the particular law.
Examples of Potential Liability
Example 1: Direct instruction. A corporate president orders an employee to submit false corporate filings to the Securities and Exchange Commission. The president may face liability under Section 172 because the command directly caused the violation.
Example 2: Knowingly preparing false documents. An employee prepares and submits fabricated corporate records with knowledge that they will be used to deceive the Commission. The employee may be treated as an aider or abettor even if the employee did not make the final filing.
Example 3: Mere position. A director is not involved in the transaction, does not approve it, and has no knowledge of the violation. The director should not be held liable solely because of board membership. Personal participation or a legally sufficient basis for responsibility must still be proven.
Example 4: Professional advice. An adviser knowingly recommends a specific scheme intended to circumvent a mandatory corporate requirement and actively assists in implementing it. Depending on the evidence, the adviser may be considered a counselor, aider, or person who caused the violation.
Defenses and Compliance Considerations
A person accused under Section 172 may contest whether the underlying corporate violation occurred, whether the person knew of the violation, and whether the person’s conduct materially contributed to it.
Relevant evidence may include board minutes, written instructions, email exchanges, compliance reports, internal approvals, audit records, and proof that the person objected to or attempted to prevent the unlawful act.
Corporate officers and employees should avoid signing, approving, or transmitting documents whose contents they know to be false or unlawful. When a questionable instruction is received, the person should request written clarification, record the objection, seek compliance advice, and refrain from participating until the legal issue is resolved.
Distinguishing Liability from Mere Negligence
Section 172 is directed at persons who aid, abet, counsel, command, induce, or cause a violation. Ordinary negligence, lack of awareness, or an incidental connection to the corporation does not automatically satisfy these requirements.
Nevertheless, deliberate disregard of a known violation may support liability under another applicable statute or regulatory rule. Under the Securities Regulation Code, for example, Section 51.5 expressly refers to substantial assistance accompanied by knowledge or reckless disregard of the wrongful act.
In administrative proceedings involving securities entities, the Securities and Exchange Commission has also applied control-person principles to officers and brokerage firms that failed to exercise due diligence in supervising regulated personnel. See SEC En Banc Case No. 12-13-312, 2019 and SEC MSRD Case No. MSRD-MID-2020-2, 2021.
Recommended Compliance Measures
Corporations can reduce exposure to secondary liability by maintaining written approval procedures, assigning responsibility for regulatory filings, preserving accurate corporate records, and conducting periodic compliance reviews.
Officers and employees should also:
- verify the accuracy of documents submitted to the Securities and Exchange Commission;
- ensure that instructions involving regulatory violations are not carried out;
- document objections to unlawful corporate acts;
- obtain independent legal advice when a proposed transaction appears irregular; and
- preserve communications and records relevant to the disputed act.
These measures do not guarantee immunity, but they help establish the actual scope of each person’s role and whether the person exercised reasonable care to prevent a violation.
Conclusion
Section 172 of R.A. No. 11232 makes clear that corporate violations may create personal consequences for individuals who knowingly assist, advise, command, induce, or cause the unlawful act.
The fine imposed on an aider or abettor may reach the amount imposed on the principal offender, but it is not automatically identical. The court must consider the person’s participation, and liability must be supported by evidence connecting the individual to the violation.
The soundest course for corporate officers, employees, directors, and advisers is to maintain accurate records, follow compliance procedures, reject unlawful instructions, and obtain legal advice before participating in a questionable corporate transaction.
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