- Brazil’s ‘Clean Companies Act’ seeks to impose civil and administrative liability on legal entities engaging in acts of corruption.
- Acts of employees, agents and representatives can make a legal entity liable (strict liability) even if such acts are not institutional or authorised.
- Administrative penalties of up to 20% of gross revenues may be imposed for violations.
- Civil penalties include forfeiture of property, suspension or prohibition of activities and the compulsory dissolution of the corporation.
- Effective compliance measures should be considered to mitigate possible sanctions.
Corruption has been an established crime under Brazilian criminal law since the 18th century. However, under Brazilian Law, with the exception to environmental crimes, legal entities are not subject to criminal liability, including for the acts of corruption.
On January 29th, 2014, the newly legislated “Clean Companies Act” (Federal Law 12,846/2013) came into force in Brazil which specifically aims at imposing civil and administrative liability on legal entities for engaging in corruption with respect to both national and foreign public administrations. Thus, the “Clean Companies Act” targets both domestic and foreign bribery through its provisions.
The Brazilian legal system has not per se changed with the promulgation of the new law. Legal entities continue to have no criminal liability for acts related to corruption or other acts against the public administration. However, through administrative or civil judicial proceedings under Federal Law 12,846/2013, legal entities will hereinafter be subject to strict civil and administrative liability, and may face sanctions that can be as harsh or as severe as the penalties under the Brazilian Criminal Code.
A year after the “Clean Companies Act” came into force, on March 18, 2015, the President signed Decree n. 8.420 regulating the terms of the new statute. The Decree provides for:
(i) procedures to be adopted to impose administrative sanctions;
(ii) procedures and criterion to be followed while calculating the penalties for violations of the terms of the law;
(iii) general provisions on leniency agreements;
(iv) factors to be considered for an effective compliance program; among others.
As previously mentioned, Law 12,846/2013 provides for the imposition of both administrative and civil sanctions on legal entities.
Strict administrative liability
The most relevant change brought by Law 12,846/2013, is the imposition of strict liability on legal entities. In other words, there is no requirement for guilt to be established under the new law in order to impose sanctions on the legal entity. Acts of employees, agents and representatives can make a legal entity liable even if such acts were not institutional or authorised.
The administrative sanctions established under the law are:
I – A fine in the amount of 0.1% (one tenth percent) to 20% (twenty percent) of the gross revenue of the last year prior to the initiation of administrative proceedings, excluding taxes, which will never be less than the advantage obtained, when the estimation1 is possible, and
II – The extraordinary publication of the sentence.
In addition to the administrative liability, the law provides the following civil sanctions, which may also be applied individually or cumulatively:
I – Forfeiture of property, rights or securities representing an advantage or profit directly or indirectly obtained from the violation, except for the right of the victim or a third party in good faith;
II – Partial suspension or prohibition of activities;
III – Compulsory dissolution of the corporation;
IV – Prohibition to receive incentives, subsidies, grants, donations or loans from agencies or public entities and public financial institutions or institutions controlled by the government for a minimum period of one (1) and maximum of five (5) years.
Compliance requirements and the compliance defence
Further, the new law introduces the concept of compliance credit / defence to Brazilian anti-corruption enforcement. It specifically establishes reporting and compliance measures that must be taken into consideration in favour of the company when applying any sanctions against legal entities. Such compliance measures would include the existence of internal auditing and integrity mechanisms and the effective application of a code of ethics. From a law enforcement perspective, authorities would consider the level of cooperation of the legal entity with the authorities and self-disclosure of criminal misconduct to the authorities.
The recently promulgated Decree provides for the establishment of objective criteria to be considered when assessing the effectiveness of a compliance program. The criteria is to follow internationally adopted-standards, similar to those used by the US DOJ under the FCPA and by the UK Serious Fraud Office under the UK Bribery Act, such as, commitment of the senior management, the existence of a comprehensive code of ethics, integrity policies and procedures duly made applicable to all employees and relevant third parties; periodic training; maintaining accounting records; etc. The decree establishes a Risk Based Approach to compliance, according to the specific risks faced by each company on a case-to-case basis.
Finally, following the issuance of the Decree, the Office of the Comptroller General (CGU) has published an ordinance (Portaria CGU 909/2015) detailing specific criteria to analyse the effectiveness of a compliance program, which companies must peruse to incorporate relevant controls into their compliance program.
1If by any reason it is not possible to use the standard of the value of the gross revenue, the fine ranges from R$ 6,000.00 (six thousand reais) to R$ 60,000,000.00 (sixty million reais).
Mariana Tumbiolo Tosi
Brasília – Porto Alegre
Rio de Janeiro – Sáo Paulo
Av. Chedid Jafet, 222 – Torre D – 5º andar
São Paulo/SP, 04551-065
Phone: +55 (11) 3522-4850