Criminal due diligence in M&A: Art. 130.2 of the Spanish Criminal Code

Every merger or acquisition reviews the target's financial, tax, employment and litigation liabilities. What many deals overlook is that there is a criminal liability that does not vanish on signing: the inheritable criminal risk in an M&A transaction. Article 130.2 of the Spanish Criminal Code (CP) prevents a corporate reorganisation from being used to extinguish a company's criminal liability: that liability transfers to whoever absorbs it or results from its division. This article explains how that succession works, what the buyer inherits, and why criminal due diligence before closing has become an indispensable part of any transaction.

What Art. 130.2 CP Says: Criminal Liability Is Not Extinguished

The starting point is a clear rule. Art. 130.2 CP provides that "the transformation, merger, absorption or division of a legal person does not extinguish its criminal liability, which shall transfer to the entity or entities into which it is transformed, with which it merges or is absorbed, or which result from the division". The consequence is direct: a corporate transaction does not operate as a criminal clean slate.

The provision goes further and closes off an obvious avenue for fraud: criminal liability is likewise not extinguished by the concealed or merely apparent dissolution of the legal person. Such an apparent dissolution is deemed to exist where the company's economic activity and material substratum continue, in substantially identical form, within another entity. The legislator thus prevents a company facing criminal proceedings from "dissolving" on paper only to re-emerge under another legal form free of burdens.

The Succession of Criminal Liability in M&A

In deal terms, Art. 130.2 CP means that the buyer inherits the acquired company's criminal liability. The entity resulting from a merger, the absorbing company or the beneficiaries of a division step into the criminal-law position of the original entity. Two common scenarios are worth distinguishing:

• Sale of shares (share deal). The legal person survives intact and changes hands; its potential criminal liabilities pass with it, because the responsible subject — the company — remains the same.
• Merger, absorption or division. The original company is integrated or split, and Art. 130.2 CP expressly transfers its criminal liability to the successor entity. Here the statutory rule is explicit.

In an asset deal the general rule is different, because what is acquired is specific assets rather than the responsible subject; even so, each case must be analysed to see whether the deal conceals a genuine business succession or whether the assets are subject to confiscation, since the risk then reappears by another route.

What the Buyer Inherits: Penalties, Fines and Confiscation

The succession is not limited to an abstract declaration of liability: it carries the criminal consequences applicable to the legal person under Art. 33.7 CP. Through the inheriting entity, the acquirer may be exposed to:

• A fine, by day-units or proportional, which is the principal penalty for a legal person.
• Suspension of activities and closure of premises and establishments.
• Disqualification from obtaining public subsidies and aid, contracting with the public sector or enjoying tax benefits and incentives.
• Judicial intervention to safeguard the rights of workers or creditors.
• Confiscation of the instruments, assets and proceeds derived from the offence — an ancillary consequence that can reach assets the buyer believed to be unencumbered.

Confiscation deserves particular attention in M&A: an undetected criminal contingency can translate, after closing, into the loss of assets or proceeds that formed part of the value paid for. The criminal liability is therefore not a mere reputational matter but an economic variable of the deal.

Criminal Due Diligence: What Is Reviewed

The answer to this risk is criminal due diligence: a specific review, distinct from ordinary legal or tax due diligence, aimed at identifying and quantifying the target's criminal exposure. Its usual scope covers:

• Proceedings and record. Open criminal proceedings, investigative steps, complaints, dismissals and prior convictions affecting the company or its directors in the exercise of their functions.
• Latent risks. Potentially criminal facts not yet before a court: ongoing internal investigations, whistleblowing-channel alerts, administrative inspections or requests from regulators that could give rise to criminal liability.
• Offence-exposure map. Analysis of the company's vulnerability to the offences attributable to a legal person: business corruption (art. 286 bis CP), money laundering, offences against the Public Treasury, environmental offences and offences against workers' rights and workplace safety.

The output of this review is not a purely formal document: it feeds directly into the price negotiation, the design of the contractual protections and, where appropriate, the decision to proceed with the deal or to restructure it.

Assessing the Compliance Model (Art. 31 bis CP)

The technical core of criminal due diligence is the assessment of the target's organisation and management model. Art. 31 bis CP allows the legal person to be exempt from liability if, before the offence, it had an adequate and effective compliance programme in place, with an autonomous supervisory body, risk management, a whistleblowing channel and a disciplinary system. For the buyer, the question is twofold:

• Would the existing model be effective to exempt? A purely paper programme, an inactive whistleblowing channel or training that is never delivered do not protect against an offence already committed. The weaker the model, the greater the inheritable risk.
• Does the model secure the future? After closing, the buyer needs a programme that prevents new offences in the integrated company and documents the group's due diligence.

Criminal due diligence and the compliance review therefore go hand in hand. We have set out the requirements of that exemption in our analysis of how compliance exempts the company, and the general liability regime in our study of corporate criminal liability.

Coverage Tools: R&W, Indemnities and Price

Once the risk is identified, the purchase agreement must cover it. The usual M&A protection tools are adapted to the criminal dimension:

• Representations and warranties. Specific seller statements on the absence of offences, criminal proceedings and investigations, and on the accuracy of the criminal-law information disclosed. Their breach triggers the seller's contractual liability.
• Indemnity clauses. The seller's obligation to hold the buyer harmless against criminal contingencies arising before closing, including fines and confiscations falling on the resulting entity.
• Price adjustments and holdbacks. Escrow or deferred-payment mechanisms that retain part of the price until the identified risks lapse or are resolved.
• Conditions precedent. Making closing contingent on the resolution of specific contingencies or on obtaining particular information.
• Post-closing compliance integration. A plan to integrate the target's prevention programme into the group's without delay and remedy the gaps identified.

One caveat bears repeating: contractual protections allocate the economic cost of the risk between the parties, but they do not displace the criminal liability, which follows the rules of Art. 130.2 CP regardless of what is agreed. Contractual cover and criminal prevention are complementary, not interchangeable.

Judicial Moderation of the Transferred Penalty

The final part of Art. 130.2 CP introduces a proportionality mechanism: when transferring the penalty to the resulting entity, the court may moderate that transfer in proportion to the relationship the original legal person bears to it. The purpose is to avoid disproportionate consequences where the responsible company is integrated into a far larger group or split into several entities.

Its scope must be understood correctly. The moderation is not a route to exoneration and does not remove the succession of liability: it presupposes that liability has transferred and merely allows the court to adjust the intensity of the criminal consequence to the reality of the successor entity. It is therefore no substitute for due diligence or contractual protections; it is a proportionality corrective that operates at the judicial stage.

Criminal-Law Support Throughout the Deal

The criminal dimension of M&A is not an incidental formality. An undetected criminal contingency can compromise the value of the deal and expose the resulting entity to fines and confiscations that ultimately fall on the buyer. The firm's role is to embed the criminal-law perspective into the transaction: to design and carry out the criminal due diligence, assess the adequacy of the compliance model under Art. 31 bis CP, translate the findings into representations, warranties and indemnities, and plan the integration of the prevention programme after closing.

At Alonso Sala, a firm dedicated exclusively to criminal law, based at Velázquez 27, Madrid and acting across Spain, we advise buyers, sellers and their directors on managing the criminal risk of corporate transactions. You can read more on our page on criminal due diligence in mergers and acquisitions.