New Jersey Section 2C:43-4 – Penalties Against Corporations; Forfeiture of Corporate Charter or Revocation of Certificate Authorizing Foreign Corporation to do Business in the State

New Jersey Law Allows Forfeiture of Corporate Charter for Criminal Activity

New Jersey law allows for some pretty severe penalties against corporations convicted of crimes, including forfeiture of their corporate charter or revocation of their certificate to do business in the state. This can essentially put a corporation out of business in New Jersey. Let’s take a look at the details of this law and what it means for corporations operating in the Garden State.

Overview of Section 2C:43-4

Section 2C:43-4 of the New Jersey code deals with penalties against corporations when they are convicted of a crime. It gives courts the ability to:

• Suspend imposition of sentence
• Sentence the corporation to pay a fine up to 3 times the gain made from the offense
• Order restitution
• Order performance of community service
• Order payment of costs and other sanctions provided by law

In addition, the law allows for forfeiture of corporate charter or revocation of the certificate allowing a foreign corporation to do business in New Jersey. This is an incredibly severe penalty that can essentially shut down a corporation’s operations in the state.

When Forfeiture of Charter Can Be Ordered

The law states that a corporation’s charter may be forfeited or certificate revoked when:

• The board of directors or high managerial agent engaged in or authorized the criminal conduct, or recklessly tolerated it
• A high managerial agent acted within the scope of employment in committing the crime
• The corporation has a history of repeated criminal activities

So the forfeiture penalty targets situations where those at the highest levels of the corporation are complicit in or enable criminal activity.

Process for Forfeiture of Charter

Forfeiture of a corporate charter does not happen automatically. Here is the process:

• The prosecutor must give notice to the corporation that it will seek forfeiture as part of sentencing
• The defense has the chance to respond and object
• The court holds a hearing to determine if forfeiture should be ordered
• If forfeiture is ordered, the Secretary of State handles the proceedings to revoke the certificate or charter

So there are procedural protections for the corporation before this severe penalty is imposed.

Implications of Forfeiture

If a corporation has its charter revoked or certificate to do business pulled, it essentially cannot legally operate in New Jersey anymore. This means:

• It cannot enter contracts or conduct business transactions
• It loses all its assets to the state
• It cannot sue or be sued
• Its directors and officers can be held personally liable for corporate debts

So forfeiture is essentially a corporate death penalty in New Jersey. It is the harshest punishment available for criminal corporate activity under the law.

Forfeiture vs. Other Penalties

While forfeiture is the most severe option, courts have several other alternatives for punishing criminal corporations under 2C:43-4. These include:

• Fines – Up to 3 times the gain from the offense
• Restitution – Paying back victims for losses
• Community service – Performing services for the community
• Court costs and fees

Courts look at factors like the history of violations, severity of the crime, and level of culpability in deciding which penalties to impose. Forfeiture is reserved for the most egregious situations.

Examples of Forfeiture Being Used

There are not a huge number of cases where New Jersey courts have ordered corporate charter forfeiture under this law. But there are a few notable examples:

• In 2002, the charter of a waste management company was revoked after an executive was convicted of illegally dumping hazardous waste. This put the company out of business.
• In 1989, a trucking company had its certificate revoked after being convicted of criminal restraint for holding female drivers against their will and assaulting them.

So forfeiture has been used in situations where a corporation is essentially conducting an ongoing criminal enterprise. It serves to immediately stop those activities.

Takeaways for Corporations

The forfeiture of charter penalty gives corporations a huge incentive to proactively monitor against and prevent criminal activity within their organizations. Some key takeaways include:

• Put strong compliance programs in place and ensure they are followed
• Promote a culture of ethics from the top down
• Investigate any potential criminal issues immediately
• Cooperate fully if any charges are brought
• Settle cases where appropriate to avoid an adverse forfeiture ruling

No legitimate corporation wants to lose its ability to do business. So compliance and vigilance are a must in New Jersey.