SUCCESSOR LIABILITY can be a problem in acquisitions, but not in this case.

The US Department of Justice told a US consumer goods company in November that it would not be prosecuted for bribes that another consumer goods company it is acquiring paid to foreign government officials should it close on the acquisition.

The US Foreign Corrupt Practices Act makes it a crime for a US company or US person to give anything of value to an official of a foreign government, international organization or foreign political party in an effort to win or retain business or secure an improper advantage. Foreign companies raising funds in US capital markets can also be prosecuted.

A US company is acquiring a foreign consumer goods company in a foreign country from a foreign seller. The US company did extensive diligence. Among other things, it had its accounting firm review around 1,300 transactions with a value of $12.9 million. The accounting firm identified $100,000 in payments that raised questions. Most of the payments were to foreign government officials to obtain permits and licenses. There were also some gifts and cash donations to government officials, and there were significant problems with how the target company recorded these payments. Expenses were inaccurately identified on the target company’s books.

The American company revealed what it had found to the US Department of Justice and asked for an assurance that the US government would not bring criminal charges or impose criminal penalties against the company after the acquisition.

The department said in a formal opinion released in November that it “does not presently intend to take any enforcement action.” While it is “a basic principle of corporate law that a company assumes certain liabilities when merging with or acquiring another foreign company,” Justice said, “[s]uccessor liability does not . . . create liability where none existed before.” The target company’s actions would not have been prosecuted by Justice because the target was not a US company.

An acquisition cannot create liability retroactively where there was none before.

The opinion is No. 14-02. The US government took six months to issue the opinion.

Keith Martin in Washington