An area of concern in carrying out a due diligence on a company or business now in Romania for a UK, and in some cases US investors, is the question of how deep to go into a company or business to ensure that there has not been a breach of the Bribery Act or the FCPA. The depth of the inquiries is dictated by the company or the business to be purchased. If the company being purchased has no government contracts and is not operating in a field where corruption is possible, then a detailed inquiry is not necessary; even so questions need to be asked. It should be remembered that all companies have to deal with the Romanian Financial Authorities an organization not known for its transparency or for following the rules.
There are no reported incidences in the press or elsewhere of how these matters will be dealt with, although the UK authorities have issued guide lines which need to be considered. It should be remembered that the company which purchases another company is responsible for breaches of the law which occurred prior to the acquisition. Caveat emptor applies even to the purchase of a company or business.
The perceived wisdom at the moment is that during the due diligence procedure proper sensible inquiries need to be made and if anything suspicious is discovered them further inquiries are required. The UK authorities have indicated that provided proper inquiries were made before the acquisition then they will not consider the previous conduct of the purchased company as a breach of the law.
No matter the level of the initial due diligence we would also advise that after the acquisition a full review is undertaken to ensure that there are no on-going breaches of the Bribery Act and FCPA.
The acquiring company should put in robust procedures as well as educating all members of staff as to the issue of the Bribery Act. The business culture in Romania is different to that of the UK. The Romanian staff need to be fully aware of the risks that they run personally, and also the risks for the company for whom they work and it’s parent if the staff act in such a way that it can be considered corruption.
The Romanian business community still does not understand that foreign laws can have an effect upon a business in Romania. Fortunately, as time passes Romanian judges and lawyers are beginning to understand the impact of EU legislation but local legislation in other countries is not so clearly understood.
So, in any due diligence make sure that the question of the Bribery Act and FCPA is faced early on in the process as this will enable other matters to be more clearly understood.
