With an ever-increasing focus being placed on corporate anti-bribery and corruption, there is no doubt that when engaging in any form of transaction in South Africa, it is essential that consideration be given to the compliance risks prior to the deal being completed, as well as post-acquisition compliance assessments and remediation. Far too often, companies overlook non-compliance with the regulatory framework applicable to their businesses. This places them at grave risk and could result in severe legal and reputational harm being suffered by the company. Accordingly, companies must ensure that they are compliant, and are seen to be compliant with local laws, as well as being aware of the extraterritorial legislation regulating anti-bribery and corruption, which may impact their businesses. The key pieces of anti-bribery and corruption legislation which may impact corporate transactions in South Africa, are outlined below.
South Africa's key anti-bribery and corruption legislation, the Prevention and Combating of Corrupt Activities Act of 2004 (PRECCA), aims to prevent and fight corruption both in the public and private sectors and applies both to natural and juristic persons. PRECCA makes it an offence to, amongst other things, give someone, in a position of power, gratification to act or not act in a certain manner. Additionally, PRECCA creates a positive duty upon a person in a position of authority (either in the public or private sector) and who knows or ought to reasonably have known that there was the commission of an act of corruption involving an amount of R100,000 or more, to report such to any police official. The failure to report is an offence in and of itself.
Further abroad, the United States' Foreign Corrupt Practices Act of 1977(FCPA) prohibits payments to foreign officials for the purpose of obtaining or keeping business and applies to foreign entities, which may, in certain circumstances, include entities based in or doing business in South Africa. The FCPA makes it unlawful for a person based in the United States, as well as certain foreign issuers of securities, to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business for or with any person. Interestingly, the FCPA allows for certain, so-called, justified, facilitation payments (a payment to a foreign official for routine governmental action in order to expedite the performance of such action), creating an area of uncertainty as regards multijurisdictional compliance policies.
The United Kingdom’s Bribery Act of 2010 (Bribery Act) establishes company liability for corrupt acts committed by persons acting on behalf of the company. The Bribery Act prohibits the bribery of public officials and business-to-business bribery. With global jurisdiction, companies can be held liable in the UK for acts of corruption committed by employees, agents or subsidiaries anywhere in the world. Unlike the FCPA, the Bribery Act does not permit facilitation payments.
Additionally, there are also lists of individuals and entities, which companies or persons are prohibited from doing business with, such as individuals or entities. One such list is from the Office of Foreign Assets Control (OFAC), which oversees US Government Sanctions against countries and individuals. OFAC maintains the Specially Designated Nationals (SDN) list in terms of which US citizens, amongst others, are prohibited from doing any business with persons or entities listed on the SDN list. Locally, South Africa's Financial Intelligence Centre contains a similar list to the SDN list, published by OFAC, which is called the Targeted Financial Sanctions List.
Transacting parties must ensure adherence to PRECCA, FCPA and the Bribery Act, where applicable, and guard against transacting with sanctioned parties. It is essential that companies implement a detailed compliance program designed to detect and prevent any shortcomings in relation to applicable legislation, thus avoiding hefty penalties and reputational harm. Certain key clauses ought to be included in transaction documents and agreements, ensuring access to information necessary to protect these interests and to cancel and seek remedial awards in the face of unlawful conduct.
By Darryl Bernstein, Partner, and Rui Lopes, Associate (and Associate Member of the Association of Certified Fraud Examiners), Dispute Resolution Practice, Johannesburg