Notícia citando a Dra. Evy Marques publicada no PaRR – Policy and Regulatory Report24/09/2014
Brazil’s anti-corruption law requires M&A precautions
Brazil’s new anti-corruption law is expected to raise red flags for parties conducting mergers and acquisitions and will require additional care both in the due diligence process and in drafting contracts, lawyers said.
Inspired by international regulations such as the Foreign Corrupt Practices Act (FCPA) in the US and the UK Bribery Act, the new law modernizes Brazil’s corporate legislation, said Salim Jorge Saud Neto, a partner at Tauil & Chequer Advogados in Rio de Janeiro.
The new law came into effect on 29 January but is currently awaiting supporting regulation to provide guidelines for its application.
While Brazil has already had several anti-corruption laws, this is the first time that companies, and not only individuals, can be held liable for bribery and corruption.
Conducting due diligence of Brazilian companies already includes assessing potential liabilities in criminal and administrative law, especially illegal practices during the public bidding processes, said Evy Marques, a partner at the law firm Felsberg e Associados in Sao Paulo and a professor at Fundacao Getulio Vargas. Now, some additional aspects will have to be taken into account, she added.
One of the most interesting aspects of the law refers to M&A and joint and successor liability in particular, said Marques. Companies belonging to the same group would now be jointly liable in case of convictions. And controlling shareholders would inherit responsibility for pre-deal acts committed by companies acquired in Brazil.
In these cases, Brazilian law is different from the FCPA, Neto noted. In the US, companies can report any problem to the Department of Justice, propose a solution, and potentially avoid penalties completely, Neto explained. The Brazilian law has a similar option but the penalty may only be reduced to a third of the original amount, he added. This risk has to be mitigated through indemnification provisions in M&A contracts, Marques said.
The new legislation is a positive development for Brazil, but the government’s delay in issuing supporting regulation is complicating the implementation of compliance measures in companies, both lawyers said. “The delay is creating legal insecurity,” Neto said.
The law still needs supporting regulation to determine criteria for calculating fines, which can be up to 20% of revenues, more than enough to bankrupt a company, Neto noted. The supporting regulation will also cover compliance programs requirements and how they could reduce penalties in case of a conviction. “These guidelines are crucial for companies when calculating the cost and format of the compliance programs they need to implement,” Marques said.
The supporting regulation was expected to be ready by January, when the law came into effect, both lawyers said. The draft is ready, but is still waiting to be signed into law by President Dilma Rousseff, according to a statement released by the Office of the Comptroller General in February.
While the government may have opted to postpone its release in the run-up to next month’s elections, spokespeople for the the office of the chief of staff did not respond to requests for comment.
by Priscilla Murphy in Rio de Janeiro.