Urgent Action and Strategic Vision Required
“Compliance crises have become a major issue for companies today and can have a considerable negative impact on companies, their employees and their shareholders. There are daily reports in the media about legal violations and the treatment of the companies concerned is often harsh. Public opinion has also changed. Violations of the law and regulations in companies are no longer perceived as “trivial offenses”, but are met with public disapproval.
Companies are therefore well advised to react quickly and correctly once they become aware of a compliance breach.”
Engelhoven/Pragal, in: “Richtiges Verhalten in der Compliance-Krise“ [“Correct Behavior in a Compliance Crisis”] (1st edition., ed.: Philipp Engelhoven) § 1 Rn.1.
In today’s business world, compliance crises pose a serious threat to companies.
Legal consequences and reputational risks of compliance violations
This results firstly from the threat of company fines pursuant to Section 30 OWiG, the confiscation of assets (“asset confiscation”) pursuant to § 73 et seq. of the German Criminal Code (StGB) and, last but not least, reputational damage.
Furthermore, since December 1, 2021, authorities such as public prosecutors, custom authorities, tax offices and antitrust authorities, have been obliged to notify the competition register maintained by the Federal Cartel Office of relevant violations of the law (see § 4 (1) WRegG). Since June 1, 2022, public contracting authorities have been obliged to consult the competition register in procurement procedures with an estimated contract value of EUR 30,000 or more (excluding VAT) (see § 6 (1) sentence 1 WRegG).
There are also numerous “anti-corruption registers” at state level. In Hamburg and Schleswig-Holstein, for example, the “Administrative Agreement on the Establishment of the Joint Register for the Protection of Fair Competition (Corruption Register)” was signed between the two states on 13.01.2014 and a joint register was set up.
All contracting authorities within the meaning of Section 2 of the Hamburg Public Procurement Act (HmbVgG) and recipients of grants from the Free and Hanseatic City of Hamburg who are obliged to apply public procurement law when awarding contracts must use the register.
Internal Review and crisis management for damage Control
Compliance violations can therefore easily spread into a “wildfire” within the company and also damage relationships with employees, customers and shareholders.
In order to avoid serious consequences, it is essential for companies to react quickly and appropriately to a compliance breach.
A comprehensive internal review of the incident is required in order to create transparency and take appropriate measures to limit the damage. This includes carefully analyzing the violations, cooperating with the authorities if necessary (not “automatically”!) and implementing preventive measures to avoid future violations.
Professional crisis management together with a forward-looking communication strategy is therefore essential in order to limit the damage and protect or restore the company’s reputation.
Companies that deal actively and responsibly with compliance crises can preserve their reputation in the long term and regain the trust of their stakeholders.
Our law firm has many years of expertise in assisting companies through compliance crises and has already successfully supported numerous companies in critical situations. With our strategic crisis management and our comprehensive legal knowledge, we are a reliable partner at your side to ensure that you remain capable of acting even in complex crises.
Feel free to contact us at any time for an initial consultation.
