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Can A Successor Firm Be Held Accountable For Bribes Perpetrated By Legacy Companies After A Merger Or Acquisition?

Australia

A successor company cannot be held liable for bribery committed by a legacy company unless the successor company continues the legacy company’s conduct and effectively commits the offending conduct through its management and officers, for which it can be prosecuted. It is not, however, legally accountable for any legacy company’s previous action (although of course, it may have to foot the bill for any investigation and prosecution).

 

Belgium

Several mergers and acquisitions scenarios are feasible. If a firm transfers ownership through a simple share deal, the firm can be held accountable regardless of whether its present shareholders possessed shares at the time of the unlawful act. This is because criminal liability is determined at the corporate level, not at the level of the company’s shareholders. If the absorbing business liquidates the absorbed company after the merger, the absorbing business cannot be held accountable for the criminal activity of the absorbed firm. This is due to the fact that a company’s criminal culpability terminates with its dissolution or liquidation. Aiders and abettors, on the other hand, can still be tried even if the main criminal is no longer alive. In the case of an asset transfer, the successor cannot be held criminally liable unless the successor continues the criminal conduct that the transferring firm engaged in, thereby triggering its own personal criminal culpability.

 

France

On the basis of Article 121-1 of the French Criminal Code, the French courts have held that in the case of a transaction in which a company loses its legal form (e.g., a merger or dissolution), the successor company cannot be held liable for any acts of bribery committed by legacy companies that were sentenced for conviction before the date of the transaction. However, the European Union’s Court of Justice has held that a conviction for an infraction committed by a heritage firm before the transaction must be transferred to the successor if it becomes final after the transaction date. According to recent case law, the French courts are continuing to adopt the above-mentioned standard. Persons: The completion of a transaction in which a corporation loses its legal form has no bearing on the conditions for the relevant individuals to be held criminally liable (eg, legal representatives of the legacy company). In the event of a merger, the absorbed entity may lose its legal personality, and its assets may be universally transferred to the successor entity. Any civil claims that have arisen or may arise are included in this broadcast.

 

Germany

Under two scenarios, a firm is accountable for legal infractions committed by its legal predecessor: The former legal entity is included in Section 30 of the Act on Administrative Offenses’ list of addressees; and Within the sense of Section 30(2a), sentence 1 of the Act on Administrative Offenses, the new legal entity is either economically equivalent to the former legal entity or its legal successor. According to the Federal Court of Justice’s reasoning, economic identity is presumed if the liable assets are utilised in the same or comparable ways as before and make up a significant portion of the new legal entity’s total assets. It is necessary that the assets acquired have maintained the new legal entity’s economically independent position. Universal succession and partial universal succession by division are covered under Section 30(2a), sentence 1 of the Act on Administrative Offenses. Individual rights transfers, spin-offs, and demergers are not covered. Ireland is a country in Europe. This depends depend on the merger or acquisition conditions, but in general, if the entity responsible for the bribery no longer exists after the merger, the successor firm will be held liable for the heritage business’s employees and agents’ actions (who themselves may also be held personally liable).

 

Switzerland

The SCC’s Article 102 does not specifically address this circumstance. In most cases, a company can only be held accountable for violations of the law committed within the corporation and by its personnel. As a result, it’s unlikely that the new parent will be held accountable for a new subsidiary’s earlier bribery offenses after a purchase. In the event of absorption, civil law responsibilities are passed to the newly merged corporation by operation of law, and it inherits civil liability. However, it is unclear if this would apply to criminal law culpability, since no examples exist.

 

UK

Commercial enterprises that have recently been taken over and their successors are not differentiated under legislation or official guidance. Companies can be held accountable for bribery committed by companies they purchase, according to case law. Companies should ensure that they conduct enough due diligence when acquiring another company and that they have suitable systems in place to prevent and identify bribery. One benefit of self-reporting and obtaining a DPA if there has been misconduct in Company A is that Company A can be rehabilitated and reborn into a new, clean Company B. However, Company B must still pay the punishment and show that the process is not a ruse.

 

United Arab Emirates

The combined company or companies cease to be corporate person(s) as a result of a merger, according to Article 291 of the Law on Commercial Businesses, and the merging company or new company replaces such company or companies in all rights and obligations. The merged company or firms’ legal successor shall be the merging company. In the case that a company is converted to another business, the following applies under Article 281 of the Companies Law: Every partner or shareholder in the new company will get an identical number of shares or stocks in the new company as the value of their shares or stocks in the old firm prior to conversion. If the value of a partner’s or shareholder’s shares or stocks is less than the applicable minimum limit of the nominal value of the new shares or stocks, the difference must be paid in cash, otherwise the partner or shareholder will be considered to have withdrawn from the firm. The value of its shares or stocks will be paid at market or book value on the conversion date, whichever is higher. The company’s corporate personality, as well as its rights and liabilities, will be preserved upon conversion and re-registration under its new legal form. Unless the creditors agree in writing, such conversion does not release the acting partners from the company’s obligations prior to the conversion. From the foregoing, it is obvious that a successor firm can be held accountable for bribery perpetrated by a legacy corporation.

 

United States of America

Under the FCPA, a successor firm may be held accountable for bribery committed by heritage corporations. The FCPA Corporate Enforcement Policy will apply to firms who discover corrupt activity through due diligence before to an acquisition, as well as those who learn of such conduct after an acquisition, according to a 2018 announcement by the Department of Justice.