Compliance

Compliance denotes the entirety of measures by which a company ensures that it observes applicable law, regulatory requirements and its own internal rules. This includes clear responsibilities, written policies, training, controls and a procedure for reporting suspected breaches. The aim is to identify risks early, prevent breaches and respond appropriately to concerns. The measures need to fit the company’s size, business model and risk profile.

Areas that matter in practice include competition law, anti-corruption, anti-money laundering, data protection, export control and occupational safety, supplemented by product safety, supply chains or environmental requirements depending on the sector. In transactions, compliance is often a separate workstream coordinated closely with legal due diligence. The focus is on whether effective procedures exist and are actually applied. Typical findings include missing policies, undocumented training, unclear responsibilities and payments to intermediaries without a traceable service. The handling of reports is also informative: are concerns treated confidentially, investigated properly and followed by action to address identified weaknesses?

Findings may have substantial economic consequences, including fines, the loss of important customers or disruption of business operations. The buyer therefore considers both legacy exposure and the cost of building an effective system. Specific risks can be addressed in the purchase agreement through warranties, indemnities or security arrangements. An indemnity alone does not automatically reduce the purchase price. A holdback or other security must be agreed separately. After the acquisition, clear responsibilities, prioritised remediation and integration into the buyer’s controls belong on the integration plan. A formal handbook is insufficient if day-to-day business practice does not follow it. This also requires senior management to follow the agreed rules themselves.

Note: This explanation is for general information only and does not constitute legal advice. The legal position depends on the individual case and may change with new legislation or case law. For a binding assessment, please consult a qualified lawyer.