Is Criminal Liability Inherited in a Merger or Acquisition?
Yes. The criminal liability of the acquired company does not stay behind: Law 20.393 makes it pass to the resulting or absorbing entity. That single rule turns criminal compliance into a due-diligence item, not a post-closing surprise.
This page explains what a buyer actually inherits: the rule of Article 18, what and how much transfers, the difference criminal-compliance due diligence makes, what to review before closing, and how the individual track stays separate from the company's. It closes with the questions that come up at the deal table.
The rule of Article 18
The reorganization changes the corporate structure, not the fate of the liability attached to it.
Article 18 of Law 20.393 provides that, in cases of transformation, merger, absorption or division of the responsible legal entity, whether before or after conviction, the penalties and additional consequences are enforced against the resulting entity or its successors. The fine passes to the resulting entity, and where more than one succeeds, the law allocates the load; forfeiture reaches the assets or amounts involved. The liability does not dissolve with the old entity: it follows the estate that continues it.
Whether that inheritance is a manageable fact or a hidden liability depends on what the buyer knew before signing.
With and without criminal due diligence
The transfer happens either way. What changes is whether the buyer priced it and protected against it, or discovered it after closing.
Without criminal due diligence
The buyer inherits an exposure it never measured: pending investigations, an inadequate prevention model, offenses latent in the target's line of business. The sanction lands on the merged estate, with no price adjustment and no contractual protection to fall back on.
With criminal due diligence
The exposure is identified before closing and moves into the deal: price adjustment, specific representations and warranties, indemnities, escrow or conditions precedent. The inherited risk becomes a negotiated, bounded and allocated variable.
What to review before closing
Criminal-compliance due diligence is narrow and concrete. Four questions carry most of the weight.
- The offense catalog applicable to the target\'s business, expanded by Law 21.595. See the Economic Crimes Law.
- The real state of the target\'s prevention model: adequate and effectively implemented, or paper only.
- Ongoing investigations, charges or self-reports, and any history of risk conduct in the last years.
- The individuals in key positions, whose personal liability does not transfer but can shape the company's exposure.
Two tracks that do not merge
The deal carries the company\'s liability to the successor, but the personal liability of managers and directors stays with the individuals. Reading both is what separates a clean acquisition from an inherited problem.
Buying a company without reading its criminal exposure?
What the target does not disclose, Article 18 makes yours. The compliance diagnosis maps the offenses applicable to the target and the state of its prevention model, so the inherited risk is on the table before, not after, closing.
Request a compliance diagnosisFrequently asked questions
Does the acquiring company inherit the target's criminal liability?
Yes. Article 18 of Law 20.393 provides that, in cases of transformation, merger, absorption or division, the penalties and consequences of criminal liability are enforced against the resulting or successor legal entity, whether before or after conviction. The transaction does not extinguish the liability; it transfers it.
Is there a limit to what is inherited?
The law sets rules by type of penalty. The fine passes to the resulting entity, and where there are several successors, the law allocates the burden. Forfeiture falls on the assets or amounts involved. The practical point is that the sanction survives the corporate reorganization and reaches the estate that absorbs it.
Is it enough that the target had a prevention model?
It is not enough for it to exist on paper. What protects is an adequate model, effectively implemented at the time of the facts. In an acquisition, what matters is whether the target's model would have exempted liability for facts already occurred; a new model from the buyer does not erase prior exposure.
How is this risk controlled in a deal?
With criminal-compliance due diligence: reviewing the offense catalog applicable to the target's business, the real state of its prevention model, ongoing investigations or charges, and the history of risk conduct. Findings flow into price, representations and warranties, and closing conditions.
What about the liability of the individuals involved?
It runs on its own track. The criminal liability of managers and directors is personal and does not transfer with the company; that of the legal entity does follow the successor entity. A deal can therefore carry the company's exposure and leave alive, in parallel, that of the individuals who took part.
Official sources
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