The Bribery Act 2010 – Are There Implications for M&A Transactions?

By Paul Whittingham, Ashton Graham Solicitors

The new Bribery Act is likely to come into force in April this year and is a hot topic in boardrooms
and the media at the moment.

In fact, anti-corruption legislation has been with us since the 19th century but comprises a
patchwork quilt of different legislation and case law. The new Act therefore tidies up the rather
messy current position but also bears down on corruption harder than the previous legislation.
The new offences are set out in detail in the Act but might broadly be summarised as prohibiting
the offering of an advantage to induce someone to perform a function improperly. This may include
offering a benefit to a public official or someone representing a business. There is a passive
offence of agreeing to accept a bribe.

Under the Act, a business may be guilty of an offence if someone offers a bribe on its’ behalf.
Although “someone” naturally includes the employees of the business, it can extend to agents or
subsidiaries of the business according to the circumstances of the case. If a company is convicted
of having failed to prevent such bribery, it may have to pay a substantial fine. It may also be
barred from tendering for public sector contracts, which could be fatal for companies whose
business comprises public sector work.

Clearly this is important in the context of buying or selling a company. The buyers will want to be
satisfied that the company they buy is not likely to suffer the fines and other penalties which may
flow from a conviction and this will be an important issue in due diligence investigations.
So what should you look for? The Act provides a defence for companies who have in place
adequate procedures designed to prevent persons associated with them from engaging in bribery.
The Government is publishing guidelines, which will state that best practice will require companies
to have policies against bribery, which are written, clear and are policed by the company. The
company will need to undertake assessments of the risk of bribery occurring and will need to show
that policies are being diligently followed. It won’t be enough simply to write a policy and leave it
at that.

As a buyer of the company, you will need to look at the policies and procedures and the
implementation of them. As a seller, you will also need to ensure you comply; otherwise you may
scupper your sale in some cases or be forced to give onerous warranties.