In an unprecedented move, the United States Department of Justice (DOJ) introduced a “safe harbor” policy for companies that voluntarily self-disclose violations identified during the M&A process. The announcement was made by US Deputy Attorney General Lisa Monaco on October 4, 2023, in a speech given at the Society of Corporate Compliance and Ethics. According to Monaco, the safe harbor will apply to companies that reveal potential violations of an acquired business, as long as the disclosure is made within half a year from the closure of the deal. This news was initially reported by Goodwin on JD Supra.
While the comprehensive details of the new measure are yet to be fully understood, it essentially offers a certain ‘peace of mind’ for acquiring companies. The policy encourages businesses to conduct thoroughly detailed investigations of their potential and actual acquisitions and to promptly report any fraudulent or non-compliant activities that they may encounter in the due diligence process. This transparency can also potentially mitigate future legal repercussions for the acquiring party.
It’s anticipated that this initiative will not only boost the level of transparency in the M&A world but also enhance the overall compliance culture by urging corporations to identify and address malpractices proactively. Additionally, it also shows a shift in the DOJ’s general approach towards corporate misconduct, reflecting a greater reliance on corporate self-policing.
The broader implications of this policy, specifically how the DOJ will enforce it and how the companies will react, remain to be seen. Legal professionals, particularly those in corporate law, should keep a close eye on the developments related to this policy. Monitoring its deployment and adoption by businesses can offer significant insights into the shifting landscape of corporate conduct and legal compliance in M&As.