In a fresh addition to its revised white-collar criminal enforcement and compliance policies, the United States Department of Justice (DOJ) recently launched a new “Mergers & Acquisitions Safe Harbor Policy”. This announcement was made by Deputy Attorney General, Lisa Monaco. As per this policy, companies that uncover criminal misconduct in the process of mergers and acquisitions, and voluntarily disclose and rectify it promptly, will be given a presumption of a declination. The announcement serves as a reminder for corporations to beware of potential misconduct discovered in mergers and acquisitions.
This move, however, could raise a number of legal implications. Acquiring companies are understandably keen to conduct rigorous due diligence to uncover any potential issues within the company they seek to acquire. Such investigations are often complex and involve considerable expertise. In circumstances where misconduct is discovered, these companies are now not only obligated to disclose it but also to rectify the situation. This obligation, while ethically commendable, significantly raises the potential legal and financial burdens on acquiring companies.
The Safe Harbor Policy offers some relief in the form of a presumption of declination, but it’s not without its own set of questions. It is worth noting that this presumption is not a guarantee. The DOJ has the discretion to overturn this presumption based on the facts of each individual case. More clarity is needed on what circumstances might convince the DOJ to reverse the presumption and potentially prosecute an otherwise compliant company.
The implications of this policy may result in acquiring companies proceeding with additional caution during mergers and acquisitions. Increased legal diligence might mean slower negotiations and potentially costly legal reviews. It serves as a reminder – buyer beware, especially of potential misconduct discovered during the due diligence phase of mergers and acquisitions.
For more detailed information on DOJ’s new policy, you can read further here.