Bribery Act 2010. New corporate offence. Mergers and acquisitions - additional risks
The Ministry of Justice has confirmed that the Bribery Act 2010 will come into force in April 2011, rather than October 2010 as originally envisaged.
The Government?launched a consultation this month on the guidance for commercial organisations on what will amount to the "adequate procedures" that they will need to put in place as a defence to the new corporate offence of bribery under the Act.
The guidance is expected to be available in final form by early 2011, so that organisations have time to familiarise themselves with it, before the Act goes live.
Example: A corporate body or a partnership will be liable under the new legislation where:
1.?A is performing services for or on behalf of the commercial organisation, C;
2.?A bribes another intending to obtain or retain business or an advantage in the conduct of business for C (C does not need to be aware of the corrupt activity, however the intention to obtain or retain business for them is key); and
3.?C is unable to make out the defence of having in place adequate procedures designed to prevent persons associated with it from engaging in bribery.
C can either be a corporate body or a partnership which is either incorporated or formed in the UK or which carries on a business or part of a business in the UK.?
C includes all companies/partnerships incorporated in the UK or who carry on business or part of a business in the UK although not the directors of C themselves.?
Whilst A must have been shown to have committed the prohibited conduct, A does not need to be prosecuted before C could be found to incur strict liability for its/his actions.
Acquirers of new businesses, they should carry out anti-corruption due diligence to minimise the risk that the target has been involved in corrupt conduct.?
Where corruption risks are identified the acquirer should consider whether it is possible to mitigate certain risks by seeking appropriate warranties and indemnities from the sellers.?
The consequences for the new parent where such issues have taken place under English law include potential reputational damage and subsequent loss of value, and for the newly acquired company the risk of a criminal conviction, an unlimited fine, debarment and confiscation of the revenue of any contract obtained as a result of corrupt conduct.
It is important for the new parent to understand what the risks are so that they can take steps post-acquisition to minimise such risks, i.e. put in place adequate procedures.
The new legislation creates the possibility that private equity buyers may incur strict liability for the acts of those associated with them. Those deemed to be "associated" could extend to companies in which a strategic stake is invested, agents, joint venture partners and employees.