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Legal Update

Brazil: Ministry of Transparency and Comptroller-General of the Union announces Practical Guide for the Evaluation of Integrity Programs of Legal Entities

25 September 2018
Tauil & Chequer Legal Update

The Practical Guide for the Evaluation of Integrity Programs in Administrative Procedures for Recognition of Liability of Legal Entities was approved through Joint Ordinance No. 6, of September 3, 2018, by the General Inspector of Administrative Discipline (Corregedor-Geral da União) and the Secretary of Transparency and Corruption Prevention under the Ministry of Transparency and Comptroller-General of the Union ("CGU"), and was released on September 14, 2018.

The Guide seeks to provide guidance to public officials that perform the evaluation of Integrity Programs of investigated legal entities to ensure greater uniformity and transparency in the criteria used by the Public Administration when applying a potential reduction of fines in cases of liability based on the Brazilian Clean Company Act1.

The guidance provided in the Guide is as follows: an analysis of the Integrity Program should be conducted only if the program could impact on the amount of the fine. For that purpose, the following conditions must be met:

  1. the Commission of the Administrative Procedure for Liability must decide on the levy of a fine;
  2. the weighing of the other standards for the calculation of the fine according to Decree No. 8,420/15 must indicate a fine percentage higher than zero; and
  3. the undue advantage obtained by the legal entity must have been lower than 20% of its gross annual revenue.

The Guide presents the same parameters established in Article 42 of Decree No. 8,420/152 for the evaluation of Integrity Programs, which have been divided into three blocks:

1

Organizational Culture of Integrity

evaluate the legal entity's organizational structure to contribute to the proper functioning of the Integrity Program

2

Integrity mechanisms, policies and procedures

assess whether the legal entity possesses and applies instruments that allow the prevention, detection and remediation of acts that violate the Brazilian Clean Company Act

3

Legal entity´s actions in response to the violation

evaluate whether the Integrity Program worked to avoid the violation – if already in existence at the time of the violation – and if the company implemented measures to prevent similar acts from recurring

 

In each of these blocks, there is a series of questions to be answered by the official responsible for evaluating the Integrity Program of the investigated legal entity. The official should include the answers in the Evaluation Spreadsheet (annexed to the Guide) and the percentage of reduction of the fine is calculated based on the answers.

With the methodology provided in the Guide, it is expected that there will be more foreseeability in the process of evaluation of the Integrity Programs by the Public Administration, as well as the corresponding benefit to the legal entities with the reduction of the amount of the fine applied due to violations of the Brazilian Clean Company Act.

1 Law No. 12,846/13.

2 Article 42, XVI, of Decree No. 8,420/15 also provides for the parameter of "transparency of the entity regarding donations to candidates and political parties". Because of the decision of the Brazilian Federal Supreme Court in ADI No. 4,650/DF, which deemed unconstitutional the contribution by companies to political campaigns, this parameter was not included in the Guide.

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