As a consequence of the entry into force of the Bribery Act 2010 (the Act) on 1 July 2011, for the first time, anti-bribery due diligence has become a necessity for companies undertaking mergers, acquisitions and investments. Transparency International UK (TI UK) has published the final version of its guidance, Anti-Bribery Due Diligence for Transactions (the guidance), to be used when undertaking anti-bribery due diligence in this context.
TI UK issued a draft consultation paper in June 2011, Bribery Act: Transparency International Consultation Regarding Anti-Bribery Guidance for Transactions (the consultation paper). The consultation process closed on 15 September 2011 and the guidance incorporates the responses received. It has been revised significantly to include substantial changes. The guidance now places stronger emphasis on taking a proportionate approach when undertaking anti-bribery due diligence, and acknowledges that where access to information is limited the due diligence process may need to be extended post-completion.
The guidance highlights significant changes to the consultation paper.
Purpose of the Guidance
The introduction has been amended to include the overarching purpose of the guidance, which is to help purchasers manage their investment risk in transactions more effectively “in the context of three overarching considerations”.
The first consideration emphasises the importance of a “risk-based approach” to anti-bribery due diligence applied to all. Such an approach should consider the “level of due diligence required as proportionate to the particulars of the investment, and the likelihood of risk of bribery”.
The second consideration demonstrates a recognition that the information required to undertake successful due diligence may not be available or accessible in advance of the merger, acquisition or investment, especially in the context of acquisitions of public companies, hostile takeovers, auctions or minority investments. Accordingly, the guidance notes that while inaccessibility of information does not “obviate the need for anti-bribery due diligence, it may have an effect on the timing, i.e., it may need to be undertaken post closure”.
The third consideration is that a good practice approach “characterises ethical and responsible businesses”. This is evidenced in the 10 good practice principles (the principles), which are considered “the most effective means for companies to manage bribery risks across multiple jurisdictions, and in a changing legal and enforcement environment”.
Ten Good Practice Principles
The principles that were outlined in the consultation paper have been expanded to now include post-completion anti-bribery due diligence actions. The guidance recognises that post-completion due diligence will be “critical and urgent if access to information has been restricted or denied during the post-acquisition phase”, and it outlines the importance of undertaking post-completion due diligence “as soon as the transaction completes”.
Where any bribery risks are identified or suspected, the principles encourage the purchaser to report the suspected bribery promptly to the authorities and consider taking “immediate remedial action”. In particular, the guidance outlines, as good practice, the instigation of a plan to ensure any post-completion due diligence undertaken runs smoothly and covers all potential issues. As a fundamental part of any merger, acquisition or investment transaction, the purchaser should ensure that the target adopts an anti-bribery due diligence programme similar to its own.
General amendments have also been made to many of the principles as a result of the more proportional approach to anti-bribery due diligence.
The consultation paper outlined a model template to be used as a basic structure for the anti-bribery due diligence process. The final version as included in the guidance has been amended to reflect a more proportional approach to anti-bribery due diligence, which is in keeping with the increase in emphasis on the importance of proportionality. Accordingly, the structure has been amended to include recognition that, in certain circumstances, the due diligence exercise may need to be conducted or continued following completion of the transaction.
It is still too early to determine how the Act will be interpreted and enforced. However, TI UK states that “a preliminary analysis of the Act suggests that there is likely to be liability related to failures in due diligence on the part of the purchaser where there is current or continuing bribery by an acquired company”. In light of this, the guidance may prove invaluable in assisting purchasers with refining the manner in which they undertake anti-bribery due diligence, as well as the development of best practice principles.