Criminal due diligence

Due diligence is an essential part of any major business transaction, in particular share transfers. Yet the criminal law aspect is sometimes forgotten in due diligence. Is there any sense at all in carrying out a criminal law audit as part of due diligence? There certainly is. We can imagine the following situations to illustrate.

Comprehensive criminal law inspections of the company

• Analysis of contractual documentation
• Investigation of decisions of company bodies
• Preliminary and subsequent legal review in the event of risky incidents
• Assessment of the risk of criminal liability of a legal person
• Risk assessment for the company in case of criminal prosecution of an employee
• Possibility to establish a suitable Criminal Compliance program

An employee is being prosecuted for an offence related to their employer’s business, typically for bribery under Section 332 of the Criminal Code. What are the risks arising from this situation for the employer and a potential share buyer?

Due diligence can be carried out not only as a precaution before a transaction, but also after the identification of a particular incident that needs to be analysed and assessed in terms of risks and for which it is necessary to propose the most suitable procedure to protect the entities concerned from the consequent effects.

These issues undoubtedly extend into the criminal liability of legal persons and, in a broader context, into civil liability. Therefore, comprehensive due diligence in the field of (not only) criminal law risks is an essential instrument that should be used whenever there is a risk of criminal law aspects in the matter under consideration.

Let us imagine a limited liability company with two executives acting as the company’s governing body. The business management of the company is divided between the executives as follows: one executive is in charge of the technical aspects of the business while the other takes care of finance and accounting.

The company decides to apply for a loan to finance its business activities. When negotiating the loan contract, one executive presents intentionally manipulated data about the company’s economic outlook to increase the chances of being granted the loan. The bank fails to detect the fraud, the company draws the loan, and is currently properly repaying it. The other executive co-signed the loan application but failed to notice any discrepancies, and only retroactively learns about the fraud by chance. What are the risks for the executive and the company arising from such situation, and what are the options for dealing with the situation?

Our law firm has many years of experience in due diligence and criminal law in general. In this context, we further specialize in criminal compliance and the criminal liability of legal persons. Hence we are able to provide you with added-value services that go beyond standard due diligence to give a qualified assessment of the criminal liability risks related to any transaction under preparation or already executed, or to any other matter associated with effects, albeit potential, in terms of criminal law.