As the economy improves and merger activity increases, it is important to remember the risks of FCPA liability when acquiring a company or entering into a joint venture. Simply put, you don’t want to acquire an FCPA violation.
Companies will sometimes rush to close a deal without conducting any due diligence — that is a recipe for disaster. On the other hand, companies alert to the risks have been able to avoid successor liability altogether or, more frequently, to obtain assurance about the scope of potential FCPA liability before the transaction is complete.
Since an acquiring company may be held criminally liable for FCPA violations committed by the target company both before and after closing, pre-closing due diligence is critical to assessing risks and avoiding liability. Additionally, the party should request measures for good governance, accurate recordkeeping and anti-bribery efforts, seek audit rights, anti-corruption representations and written commitments to abide by anti-corruption laws; even if these requests aren’t honored, a record of such requests could help protect against or minimize FCPA exposure for the company. For joint ventures, the company can be held liable for the future conduct of the joint venture, but it depends on the governance proportion of the JV or majority company (e.g. board members, voting rights).
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