Inside Experts: Be smart about successor liability

Acquiring companies must prioritize pre-acquisition due diligence and post-acquisition compliance enhancements to root out purchased companies’ FCPA violations

Within the movement to “reform” the Foreign Corruption Practices Act (FCPA), one of the key platforms is limiting or eliminating successor liability. Holding one company responsible for the prior bad acts of a different company seems wrong. Add to that the fact that acquiring companies won’t and can’t know about purchased companies’ bribery, and the unfairness of continuing liability through a change in ownership—and possibly even a change in corporate structure—is manifest.

The Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) don’t see it that way. Successor liability has its basis in legal history—the idea that “when you buy a company, you buy its liability” is highly ingrained—and in legal theory. But is that always the case?

Contributing Author

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Howard Sklar

Howard Sklar is senior corporate counsel at Recommind, Inc. Prior to joining Recommind, Howard headed anti-corruption and compliance programs at American Express and Hewlett-Packard. He...

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