A legislative bill passed through the Brazilian Senate on 4 July 2013 that will introduce wide-reaching anti-corruption mechanisms, including the ability to recover the assets representing, directly or indirectly, the benefits gained from the corrupt acts (“the Bill”). If, as is expected, it is approved by the President, it will come into effect in early 2014.
Legislative Bill No. 6826/2010
We understand that the Bill imposes civil law and administrative liability on companies for a variety of prohibited acts, including the offer or payment of bribes to a public officials (both foreign and domestic) and acts that have the effect of improperly interfering with the tendering process for public contracts. It will apply to business organisations of any type, in addition to foundations and associations, that are either based in Brazil or have some physical presence there (such as an office or branch) and a company will be liable for the acts of directors, officers, employees or agents (in a similar way to the corporate criminal offence under the UK Bribery Act). The Bill, however, does not introduce corporate criminal liability of legal entities as that would be incompatible with the current legal framework in Brazil.
We understand that civil sanctions that can be ordered by the Public Prosecutor under the proposed law include:
- Stripping the company of the assets or rights that it has acquired from those acts that infringed the provisions of the law;
- The suspension of a company’s activities or the dissolution of a company; and
- A general prohibition from receiving subsidies, grants or loans from public entities.
Administrative sanctions can include a potentially significant fine up to the amount of 20% of the company’s gross revenue in the fiscal year preceding the initiation of administrative proceedings and a publication of the decision.
The administrative sanctions and the civil sanction of taking assets do not require any finding of fault or intent by the organisation; all that is required is evidence that illegal acts had been committed by an employee for the benefit of the company. However, it is important to note that the existence of an effective compliance programme will be considered as a mitigating factor by the authorities and could lead to a reduction of any sanction, although it does not provide a wholesale defence to any breach of the legislation like the UK Bribery Act. The Government is will introduce guidance on its expectations as to what comprises an adequate compliance programme once the Bill becomes law. The Bill also allows for leniency agreements similar to the US and now UK concept of deferred prosecution agreements allowing for the reduction of up to two-thirds of the applicable penalty.
The bill affirms there will be ‘successor liability’. So should a company be acquired or merge the liability to pay fines or provide full restitution of the damage caused will remain and be transferred along with the assets/shares of that company to the new owner. This aspect of the bill was challenged but has not been watered down.
Like the UK Bribery Act, one important consequence of the Bill, provided the President blesses it, is the impending need for companies in Brazil to develop and maintain adequate and effective compliance programmes. That will not only assist in preventing wrongdoing in the first place, but also assist in obtaining leniency from the Public Prosecutor in the event that employees do commit unlawful acts.