New DOJ’s Safe Harbor Policy for M&A and Its Impact on Argentina

On October 4, 2023, the Deputy Attorney General of the US Department of Justice (DOJ) announced a new department-wide mergers and acquisitions (M&A) “safe harbor” policy. This policy aims at encouraging acquiring companies to disclose any criminal misconduct they uncover during pre- or post-acquisition M&A due diligence, in exchange of benefits.
 

Specifically, the DOJ expects companies undercovering misconducts in the framework of an M&A deal to:

1.         Come forward and voluntarily report the criminal misconduct within six months from the date of closing.

2.         Cooperate with the ensuing investigations.

3.         Engage in appropriate remediation (including implementing effective compliance programs) within one year from the date of closing.

4.         Disgorge all ill-gotten gains.
 

If the DOJ’s requirements are fulfilled, acquiring companies can benefit from a presumption of declination.

Even though the policy sets specific timelines for disclosure and remediation, the DOJ stated that those baselines may be extended, as they are subject to an analysis of reasonability. This is because the DOJ acknowledges that each M&A deal varies depending on the circumstances and the complexity of the transaction, among other factors, that may delay implementing the necessary measures and steps to follow.

The DOJ also announced that disclosing wrongdoing within the safe harbor will not be factored into the acquiring company's future recidivist analysis. Further, the acquired entity may also qualify for applicable voluntary self-disclosure benefits, including potential declination, if no aggravating factors exist.

Through this policy, the DOJ is recognizing that the fact that acquiring companies have ineffective compliance programs, and a history of misconduct should not be a reason to refrain M&A deals. In fact, the DOJ is placing an enhanced premium on timely compliance-related due diligence and integration that can effectively de-risk a transaction.

Considering local regulations and compliance risks is essential for M&A deals whenever target companies are located or somehow operate in Argentina. In those cases, local advisors may provide useful legal advice on alternatives to also mitigate local contingences for acquiring companies and target entities. Local advice may also be useful to conduct necessary post-closing internal investigations, if red flags are detected during the due diligence process.