Transparency International’s “Anti-Bribery Due Diligence for Transactions”

Transparency International UK ( http://www.transparency.org.uk/) has released a very useful report on this topic. Introductory excerpts:

Purpose of this guidance: Anti-bribery due diligence can help purchasers to manage their investment risk in transactions more effectively. However, it is often not undertaken, neglected, or allocated insufficient time and resources. A recent survey found that:

“Despite the many recent examples of the perils of ignoring the fraud and corruption dimension of these assessments, a fifth of companies still do not consider it as part of M&A due diligence, and a quarter never consider it in a post-acquisition review.”

This guidance is intended to provide a practical tool for companies on undertaking anti-bribery due diligence in the course of mergers, acquisitions and investment. It reflects the approach for corporate anti-bribery programmes set out in the Business Principles for Countering Bribery3, which is an anti-bribery code widely recognised as an international benchmark for good practice, and developed in close consultation with companies and other stakeholders. This guidance is provided in the context of three overarching considerations:

• Anti-bribery due diligence should be applied to all investments but on a risk-based approach, with the level of due diligence being proportionate to the investment and the perceived likelihood of risk of bribery.
• In many cases the necessary information for due diligence may not be accessible, such as in acquisition of public companies, hostile take-overs, auctions or minority investments. This does not obviate the need for anti-bribery due diligence, but has an effect on the timing – i.e., it may need to be undertaken post-closure.
• A good practice approach characterises ethical and responsible businesses, but is also the most effective means for companies to manage bribery risks across multiple jurisdictions and in a changing legal and enforcement environment.

There are three intended audiences for this guidance:

• Companies that are considering or are undertaking a merger, acquisition or investment (hereafter referred to as a transaction);
• Companies that may be subject to due diligence, as companies positioning themselves to be acquired must also prepare themselves to be ready to meet the standards required in anti-bribery due diligence; and
• Professional firms and advisers that are involved in transactions and related due diligence.

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TEN GOOD PRACTICE PRINCIPLES FOR ANTI-BRIBERY DUE DILIGENCE IN MERGERS, ACQUISITIONS AND INVESTMENTS

Internal policies and procedures

1. The purchaser (or investor)1 has a public anti-bribery policy.
Comment: This will provide a reference point for the due diligence approach and also specific protection for the due diligence process – for example, in helping to ensure that no bribe should be made to obtain information or speed up the transaction, either directly or through a third party.

2. The purchaser ensures it has an adequate anti-bribery programme that is compatible with the Business Principles for Countering Bribery or an equivalent international code or standard.

Due diligence – pre acquisition

3. Anti-bribery due diligence is considered on a proportionate basis for all investments.
Comment: This includes M&A transactions, acquisitions of businesses, private equity investments and other forms of investment.

4. The level of anti-bribery due diligence for the transaction is commensurate with the bribery risks.
Comment: The level of bribery risk should be determined at the start of the process. This will be to ensure that the due diligence is conducted with sufficient depth and resources to be undertaken effectively.

5. Anti-bribery due diligence starts sufficiently early in the due diligence process to allow adequate due diligence to be carried out and for the findings to influence the outcome of the negotiations or stimulate further review
if necessary.

6. The partners or board provide commitment and oversight to the due diligence reviews.
Comment: The findings of anti-bribery due diligence should be properly examined and understood at the highest level of decision-making during the transaction, for example at the level of the board or investment committee.

7. Information gained during the anti-bribery due diligence is passed on efficiently and effectively to the company’s management once the investment has been made.
Comment: For example, information about the adequacy of the anti-corruption procedures in the target company should be used to initiate remedial action.

Due diligence – post acquisition

8. The purchaser starts to conduct due diligence on a proportionate basis immediately after purchase to determine if there is any current bribery and if so, takes immediate remedial action.
Comment: Gathering sufficiently detailed information is one of the challenges of anti-bribery due diligence. Where this has not been possible pre-closure, a full due diligence should be carried out within a set time period post-completion.

9. The purchaser ensures that the target has or adopts an adequate anti-bribery programme equivalent to its own.

10. Bribery detected through due diligence is reported to the authorities.
Comment: This principle is based on the presumption that bribery discovered during due diligence should be reported to the authorities. Purchasers may use their discretion, bearing in mind factors such as proportionality in reporting, the deal timetable and their own legal obligations, but it is in their interest to report to authorities as in this way they can discuss the issue and establish how the bribery could affect the deal.

http://bdti.mastertree.jp/f/pw0jnhmz

http://www.transparency.org.uk/our-work/publications/227-anti-bribery-due-diligence-for-transactions

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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