Mergers and acquisitions (M&A) transactions can be significantly affected by sanction regimes, and liabilities resulting thereof, especially criminal liability. The focus should not just be put on acquiring a company that may be exposed to liabilities resulting from existing breaches of sanctions, but rather when the execution of the transaction itself could constitute a breach of sanctions. In said situations, considering the limitations sanction regimes/criminal law pose is a key aspect to set up the right structure for the transaction as well as for adopting the necessary measures to exclude/mitigate said exposure.

For example, sanction regimes prevent putting assets and/or economic profits at the disposal of certain targeted individuals and the breach of said obligations may entail criminal liabilities. What happens if a sanctioned individual holds, through an affiliated-non-sanctioned-entity, a stake in a multinational company that is looking to be acquired? Can said stake be acquired? Under which circumstances and what measures should be adopted? If said stake is not finally acquired, should the new shareholder establish any kind of mechanism to prevent the payment of dividends up the ladder and into the non-sanctioned affiliated entity?

When considering the answers to these questions, and the decisions that will need to be adopted by the company’s internal bodies, it may be advisable to keep the explanations simple and direct, in case they need to be shared at some point in time with the authorities or even a judge in the criminal jurisdiction. In-house counsels that have faced these kinds of situations acknowledge the multiple challenges resulting thereof, which may be summarised as the encounter of two worlds: M&A and criminal law.