Under the law, the term disgorge refers to the act of surrendering or giving up something that was unlawfully or wrongfully obtained, or restituting something taken that should not have been taken in the first place. In the business context, disgorgement is a legal remedy that allows a court to require a person who has wrongfully obtained or retained money or property to return it to its rightful owner.
For example, in a circumstances where a company has taken money from customers through false advertising or false promises, the court will often require the company to disgorge the money taken from customers, and provide those customers with restitution. This is done to ensure restitution is provided to those harmed by the unlawful activities of the company, in addition to any other applicable remedies, such as civil or criminal penalties.
How Disgorgement Can Impact Your Business
Disgorgement can have a significant impact on a business–both financially and reputationally. A disgorgement award can very costly, forcing a company to surrender ill-gotten gains without being able to recoup the cost of any prior investments. Furthermore, public disclosure of disgorgement orders can also affect public opinion of the company.
In light of the potential consequences, it’s important that businesses put in place safeguards to prevent or detect activities that may result in disgorgement being ordered by a court. This should include instituting policies or procedures to ensure that the company’s operations and marketing activities comply with applicable laws and regulations; monitoring of customer feedback, when applicable; and regular internal compliance reviews.
Ultimately, disgorgement should serve as a serious wakeup call for businesses that find themselves facing such an order. While the impact of disgorgement can have far-reaching consequences, putting in place the necessary safeguards to protect your business can be a major step in helping to prevent disgorgement orders in the future.