Anti-Corruption Due Diligence and Acquirer’s Liability in M&A Transactions

Argentine anti-corruption regulations do not set forth successor liability on purchasers of companies for bribery committed by such companies prior to being acquired (1).
 
Foreign extraterritorial anti-corruption laws have a different approach. For example, the Foreign Corrupt Practices Act (“FCPA”) of the United States holds acquirers subject to FCPA responsible for target’s pre-acquisition corrupt actions, unless such actions were not subject to FCPA jurisdiction. This concept was recently ratified by Opinion 14-02 of the U.S. Department of Justice.
 
However, the acquirer may limit or be exempted from the corresponding sanctions by demonstrating that he/she conducted a thorough anti-corruption due diligence (“DD”) and implemented, as soon as possible, the changes necessary to comply with applicable anti-corruption regulations. This DD must be performed both before (to the extent permitted by seller) and after the closing of the transaction.
 
In such context, it is increasingly common in M&As in Argentina that purchasers subject to FCPA and other foreign anti-corruption regulations include in their DD a chapter to identify risks of corruption (“red flags”) in the operations of the company to be acquired.
 
The results of the DD are later analyzed under the different applicable regulations (e.g. Argentine regulations, FCPA, UK Bribery Act, Brazil’s Anti-Corruption Act No. 12,846, etc.).
 
Once the acquisition has concluded, the results of the DD are used to change the practices of the acquired company that are not compatible with the purchaser’s way of doing business and/or with applicable regulations.
 
The circumstances of each transaction are unique and require tailoring the DD. Hence, it is fundamental to have a comprehensive understanding of the local market and culture as well as the interaction between local and foreign anti-corruption regulations applicable to the case.
 
 
 
 

1. The bill of amendment of the Criminal Code proposes to hold legal entities accountable, under certain circumstances, for bribery and that "The successor of the company subject to a transformation, merger, spin-off or takeover shall be responsible for the proportionate share corresponding to the participation in the offense”.