Doing business in UK with agents? Beware the Bribery Act

South African entrepreneurs wishing to do business with UK companies must be aware of the potential implications of the UK Bribery Act for any transactions.

This area of law is so new – it only came into force in 2010 – that there is little case law to determine how the act will affect South African companies "associated" with UK companies. Nonetheless, those wishing to buy or sell a business or franchise should note the following:

It is an offence under the act for a business to fail to prevent a bribe being paid or received on its behalf through an agent. A bribe means an offer, promise or financial or other advantage intending to induce or reward a person (or third party) for performing a relevant activity improperly (where improperly means as a result of a bribe). 

A ‘relevant activity’ means something ordinarily expected to be performed in good faith by a seller, buyer or franchisee, such as purchasing a business or taking up a contract. 

If one of the parties involved in a bribe is a business trading in the UK, the South African party will be liable under the act for failing to prevent its agent paying a bribe. This even applies if all relevant activities are performed entirely in South Africa.

It should also be noted that the person receiving the bribe (eg, the agent) does not have to be the same person performing the relevant activity improperly (eg, the business owner who opts to sell their business to a specific buyer on the agent’s advice). So a business owner could be found liable up to a maximum £5,000 fine for its agent taking a bribe. 

Accepting a bribe is an offence, even if the business owner or buyer doesn’t realise that the performance of the activity in exchange for the bribe was improper

The act does, however, take into account local legislation in jurisdictions where the business transaction is taking place.

For example, there is a potential risk of bribery in the following circumstances: a South African franchise owner sends an agent to the UK to discuss franchise expansion. While there the agent suggests to a potential franchisee that the franchisor would pay for them to travel to South Africa in order to help out with some franchise initiatives in exchange for face time with the franchisor. 

However, Dave Loxton, director and forensics practice area head at Werksmans Attorneys, says:

"So where the local legislation requires government involvement and, for example, payment for — or shared costs of — corporations doing business in that particular country, then it will not fall foul of the UK legislation." 

A business may be able to escape liability if it can show that it has put ‘adequate procedures’ in place to prevent agents using bribery. Such procedures may include carrying out a risk assessment, communicating to agents what constitutes a bribe and monitoring any UK business arrangements. 

Mr Loxton goes on to say: "Corporations must implement measures to mitigate their risks. In this case, these could include a proper due diligence of the official, as well as an investigation of that particular country and its approach to corruption.”

The act does not apply to someone who simply supplies or sells goods to a business. Business owners should also be rest assured that genuine corporate hospitality and promotional expenditure are not considered a bribe.

Businesses should be aware of the act, but too much anxiety over its application may be misplaced. Chandrashekhar Krishnan, executive director of pressure group Transparency International UK, says: "There's no reason prosecutors are going to go chasing after people because they're taking each other out for lunch."

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