Forex, Derivatives and Structured Finance
New administrative liability of legal entities for acts of local and transnational corruption - Law 1778 of 2016
On February 2nd, the Colombian Congress enacted Law 1778 of 2016 "pursuant to which rules on liability of legal entities related with the commission of acts of transnational corruption and other provisions related with the fight against corruption" (the "Law 1778"). Law 1778 grants faculties to the Superintendence of Companies (the "Superintendence") regarding the possibility to investigate and sanction legal entities whose, employees, contractors, directors or partners (of their own or any subordinate entity), give, offer or promise to give to a foreign public official1, sums of money, any object of monetary value, or any other kind of benefit or value in exchange for the latter to perform, omit or delay acts related with their duties and in connection with a business or international transaction.
According to Law 1778, the parent companies may also be responsible, along with their subordinate entities when, with the latter’s acknowledgement or tolerance, such subordinate entities (employees, contractors, directors or partners) perform acts of transnational bribery.
Sanctions that may be imposed against legal entities for incurring in actions related with transnational bribery are as follows:
- Fines by the Superintendence of up to 200.000 minimum monthly salaries (COP$137.891.000.000, approximately US$41,785,151)
- Debarment to contract with government owned entities for up to 20 years.
- Publication of the sanction in wide circulation media and on the website of the sanctioned legal person.
- Prohibition to receive incentives or subsidies from the government for a 5 years period.
- Registration of the sanction contained in the administrative act in the commercial registry (or in the registries managed by the surveillance authorities supervising the specific legal entity) of the sanctioned legal person.
It is important to bear in mind that Law 1778 extends the effects of sanctions to (i) absorbing or created companies under merger transactions; (ii) divided companies and/or beneficiaries under spin-off transactions and (iii) the acquirer in change of control situations. Additionally, the effects are extended to any other associative form different to corporations.
It is important to note that sanctioning faculties of the Superintendence under the Law 1778 are not subject or limited to other processes and/or decisions taken by any other jurisdictions (no pre-judgement between jurisdictions).
For the graduation of sanctions, Law 1778 establishes different criteria to be considered by the Superintendence, such as: (i) the financial capacity of the offender, (ii) the economic benefit obtained or intended and, (iii) the existence, implementation and effectiveness of transparency programs, among others. In addition, there are benefits for the investigated corporations if misconducts are opportunely reported to the Superintendence and if corporation collaborate in the course of the investigation. Benefits may include the total or partial waiver of the penalty.
Finally, Article 34 of Law 1474 was modified, related to actions against legal entities which benefited from the commission of crimes against the public administration (for example, local corruption). In this context, to the extent that a condemnatory ruling has been dully issued by criminal courts against the legal representative or the director of a company, the Superintendence may impose the same sanctions referenced above for transnational bribery. In this case, the mechanisms for graduating the sanctions are the following: (i) the existence, implementation and effectiveness of transparency programs and business ethics codes, (ii) adequate due diligence (in case of acquisition by a third party) and, (iii) the provision of evidence relating to the commission of conduct by its directors or employees, among others.
The statute of limitations related with the sanctioning faculties of the Superintendence are as follows: for the scenario of foreign bribery, the statute of limitations is now 10 years while for the scenario of local bribery, the sanctioning faculties expire after 5 years as from the moment in which the conduct occurred (Art. 235 of Law 222 of 1995).
1Foreign public official has been defined as any person holding a legislative, administrative or judicial office of a foreign country, whether appointed or elected; any person exercising a public function for a foreign country, including for a public agency or public enterprise; and any official or agent of a public international organization.