Criminal Risks of M&A transactions
Risks of criminal liability are normally not the primary focus of considerations and reviews during the preparatory phase of an acquisition. However, M&A transaction harbor potential risks of criminal liability. One example is disclosing companies’ secrets. Where the target is a stock corporation, law requires the members of its executive board to maintain secrecy over confidential information. Anyone disclosing those secrets violates the German Stock Corporation Act or, depending on the company, the Limited Corporations Act. A purchaser is interested in any information related to the company, as well as the seller wants to provide this information to guarantee a smooth transaction. There are many more conflicts of similar latitude, conflicts that managing directors are not aware of. They may be the basis for prosecutorial fiscal consequences of unknown magnitude. Involving a firm that looks exactly at the blind spots helps to prevent situations in which an all too optimistic statement of the annual turnover turns into charges of fraud.