Brazil refines its leniency framework under the anti-corruption law in light of M&A transactions

1. Introduction

In M&A transactions, one of the investor’s primary concerns relates to potential compliance violations committed by the target company. This is particularly relevant because, even if the misconduct dates prior to the transaction, the target company, and, in certain cases, the investor or other entities within its economic group, may remain liable for significant penalties, including administrative fines (which may reach up to 20% of the target company’s gross revenue) and full compensation for damages, including the return of any undue advantage¹ derived from the misconduct.

Within the Brazilian legal framework, the main mechanism to mitigate such exposure is the execution of a leniency agreement with the competent authorities, which may provide for a reduction of applicable fines. However, particularly in the M&A context, leniency agreements have historically lacked procedural clarity and predictability, especially with respect to the investor’s eligibility and the extent of available benefits.

The Interministerial Ordinance CGU/AGU No. 1 (the “Ordinance”), enacted on December 23, 2025, established a procedure for the negotiation and execution of leniency agreements and, in the context of M&A transactions, introduces two key innovations:

1. it allows the acquirer to directly negotiate and enter into a leniency agreement in relation to misconduct committed by the target company, without requiring the target company itself to lead the process; and
2. it provides greater certainty as to the applicable benefits by assuring a fixed reduction of two-thirds of the applicable fine, rather than leaving such reduction to the discretion of the authorities within a statutory range.²

Nevertheless, for the acquirers to be entitled to directly enter into a leniency agreement and obtain the reduction of the fine by two-thirds, certain terms and conditions must be met, as further detailed.

2. Who may enter into a leniency agreement in an M&A context

The legal entity that has purchased a company involved in wrongful acts occurred prior to the transaction, whether through merger, consolidation or any other corporate transaction, may enter into the leniency agreement.

Eligibility for such agreement is not affected by when the misconduct is identified, and therefore applies regardless of whether the relevant facts were uncovered during pre-closing due diligence or only discovered after the implementation of the transaction, subject to compliance with the applicable timeframe for submission, as further detailed below

3. Scope of misconduct covered by the ordinance

Leniency agreements may be entered into with legal entities responsible for unlawful acts provided for under Law No. 12,846/2013 (Anti-Corruption Law), Law No. 8,429/1992 (Administrative Improbity Law), Law No. 14,133/2021 (New Public Procurement Law), as well as other rules governing public procurement and administrative contracts.

In practical terms, such misconducts include: (i) offering or granting undue advantages to public officials (bribery); (ii) financing or otherwise supporting unlawful acts; (iii) using intermediaries to conceal identity or beneficial ownership; (iv) fraud in public tenders and government contracts (including bid rigging, collusion, sham entities or contractual manipulation); and (v) hindering or obstructing public investigations or inspections.

4. Deadline for filing

The request to enter into a leniency agreement must be submitted within 12 (twelve) months following the completion of the transaction, through voluntary reporting of the relevant facts to the Brazilian Office of the Comptroller General (CGU).

In this context, it is important to highlight the introduction of a marker mechanism, which represents a novel feature of the Brazilian leniency framework. Previously, companies faced a practical dilemma when considering a leniency agreement, whether to promptly report the misconduct in order to secure priority and avoid the risk of prior public investigation, or to first conduct a thorough internal investigation to ensure a complete and well-supported disclosure.

The marker mechanism addresses this tension by allowing the acquirer to formally express its interest in entering into a leniency agreement, thereby securing its position and preserving the benefits associated with timely reporting, while also obtaining a defined period (to be defined by public authorities) to complete its internal investigation and substantiate the facts to be reported.

5. Requirements

The acquirer must cumulatively prove the following admissibility criteria:

1. First Manifestation of Interest: The acquirer must be the first to manifest interest in cooperating for the investigation of a specific harmful act, whenever this circumstance is deemed relevant.
2. Total Cessation of Illicit Acts: The target company must have completely ceased its involvement in the harmful act starting from the date the agreement is proposed.
3. Admission of Objective Responsibility: The acquirer must explicitly admit the target company’s objective responsibility for the harmful acts under investigation.
4. Full and Permanent Cooperation: The acquirer is required to cooperate fully and permanently with investigations and administrative processes.
5. Provision of Evidence: The acquirer must provide information, documents, and material elements that prove the illicit act and assist in identifying others involved.
6. Effectiveness of Collaboration: The collaboration is deemed effective if it provides useful elements—such as confessions, documents, or declarations—that assist in identifying other involved parties and lead to the swift acquisition of evidence.
7. Clean Compliance History: the acquirer must not have been sanctioned under Anti-Corruption or bidding laws in the five years prior to the acquisition.
8. Implementation of Integrity Program: the acquirer must demonstrate that it had an integrity program duly implemented and effectively operating at the time of the conclusion of the acquisition, and that such program is deemed by the CGU to be consistent with the standards required by applicable law.
9. Genuineness of Transaction: The deal must have a valid commercial purpose, with no prior participation by the acquirer in the illicit acts.

6. Responsibility for payment

The administrative fine applies in all cases, although subject to the guaranteed reduction of up to two-thirds under the leniency agreement entered into by the acquirer.

With respect to the forfeiture of undue advantage, the acquirer may either return such amounts or, where applicable, identify the actual beneficiary, provided that sufficient evidence is submitted to enable its accountability.

The Ordinance also introduces mechanisms aimed at mitigating the risk of double recovery arising from parallel proceedings involving the same underlying facts. In the domestic context, it allows for an offset of amounts paid in other administrative or judicial proceedings.

At the international level, the framework contemplates the possibility of crediting sanctions imposed by foreign authorities, subject to the existence of reciprocity between jurisdictions.  This provision is particularly relevant in cross-border enforcement scenarios, where multiple authorities may assert jurisdiction over the same conduct.

In addition, the ordinance establishes a coordination mechanism with antitrust enforcement.  Entities that have entered into settlements with the Brazilian Antitrust Authority (CADE) may, within a six-month period, seek corresponding benefits before the CGU/AGU in relation to the same conduct, potentially securing a reduction of up to two-thirds in applicable fines.

From an M&A perspective, these developments represent a meaningful shift. By introducing greater predictability in the determination of financial exposure, the Ordinance enables parties to more effectively quantify potential liabilities arising from anti-corruption violations. This, in turn, facilitates a more objective allocation of risk between buyer and seller, including through indemnification mechanisms. Historically, the lack of clarity around potential outcomes often resulted in deal uncertainty or even in deal disruption when such issues were identified. Under the new framework, these risks can be more readily assessed and structured, reducing execution uncertainty.

7. Key watchpoints for M&A transactions

Given the benefits of the execution of a leniency agreement in the context of an M&A, it becomes crucial that investors negotiate certain terms and conditions in the definitive agreements in order to be able to enjoy the benefits of the leniency agreement, including the following:

1. Representations and Warranties: include robust representations and warranties relating to compliance with applicable anti-corruption, public procurement and integrity rules, as well as specific representations addressing matters that may impact eligibility for a leniency agreement, including the absence of ongoing investigations, enforcement proceedings or prior knowledge of misconduct by the competent authorities, to the extent such circumstances could affect the acquirer’s ability to qualify for the benefits of leniency.
2. Indemnification: assure the right to be indemnified for the breach of the compliance representation and for any other act involving compliance matters, including applicable fines, not subject to any restrictions (cap, basket, de minimis or survival limitations), given the potential materiality of the risk.
3. Self-Reporting Right: expressly grant the acquirer the right to self-report the relevant misconduct to the competent authorities, irrespective of seller consent, and to independently conduct and negotiate any leniency process on such terms as it deems appropriate, without prejudice to the purchaser’s indemnification rights.
4. Post-Closing Diligence: in case the transaction does not involve the acquisition of 100 percent of the target companies, include the right of investor to conduct immediate compliance internal investigations in the target companies following closing, given the 12-month reporting deadline and the fact that this kind of wrongdoings are generally caught in deep and specific investigations generally not covered in standard M&A Due Diligences.
5. Confidential Information: ensure that confidentiality obligations expressly carve out disclosures required for the purposes of reporting misconduct and negotiating or entering into a leniency agreement with competent authorities, including the sharing of information and documents in connection therewith.
6. International Practice: consider alignment with international enforcement standards, particularly in the United States, where authorities such as the U.S. Department of Justice encourage prompt self-reporting in M&A contexts, providing a safe harbor for disclosure within six months from closing and timely remediation thereafter.

8. Conclusion

The Ordinance introduces a framework that actively incentivizes transparency by acquirers in M&A transactions, notably by assuring a reduction of two-thirds of the applicable fine in cases of voluntary self-reporting. While such reduction represents the statutory maximum, the fact that it is expressly guaranteed in this context significantly enhances deal certainty and supports more proactive disclosure strategies.

In parallel, the Ordinance contributes to containing the spillover of liabilities, helping to limit the impact of pre-acquisition misconduct within the broader economic group. It also fosters coordination with foreign authorities, allowing for recognition of payments made abroad and reducing the risk of double penalty in cross-border transactions.  The new framework reinforces the importance of early assessment and strategic planning, positioning transparency as a key lever in managing M&A risk in Brazil.

For further information or advice, contact our team.

---

1. The methodology for calculating the “undue advantage” is based on three primary approaches: (i) net revenue derived from the misconduct, less lawful costs; (ii) costs avoided, including tax or regulatory savings; and (iii) any additional profit obtained in connection with the unlawful conduct.

2. It should be noted that the obligation to fully compensate for damages remains unaffected, and the amount of such disgorgement will be assessed on a case-by-case basis.