13.3 Legal Requirements and Legal Constraints 437should not authorise it without finding out whether it is in the interests of the
company to do so.
Furthermore, it is part of board members’ duty of care to ensure that the com-
pany’s confidential information is adequately protected. Buyer due diligence
should always be subject to restrictions and limited to certain categories of infor-
mation. The use of information disclosed to the prospective buyer should be con-
strained by non-disclosure and no-use obligations (NDA, section 12.2).
Buyer due diligence can be restricted through the use of a data room and/or
third party intermediaries. The buyer can be given an opportunity to verify certain
information on the basis of documents disclosed to the buyer in the data room.
Where it is not in the interests of the company to grant the buyer access to confi-
dential information, external third party intermediaries can be used. For example,
buyer due diligence can be performed by an independent auditor, and the buyer
can be given an abstract report of the auditor’s results. Buyer due diligence can
partly be replaced by vendor due diligence.
Board members’ duty of care can thus prohibit the granting of buyer due dili-
gence where: the acquisition is in practice impossible or unlikely; the target com-
pany does not have any interest in being sold; or there is no prior NDA.
For example, the management board of a German AG must act in the interests of the com-
pany.^20 This duty also gives rise to a duty of the management board of a target company to
protect the company’s confidential information.^21 The management board of a target com-
pany may provide the potential buyer with confidential information only where it is in the
interests of the target company to do so. The target company’s interest in permitting disclo-
sure to the potential buyer depends on the target company’s interest in the acquisition.^22
The decision is made easier by the existence of a business judgment rule.^23
Second, the structuring of the transaction can play a role. In an asset deal, the
company itself acts as the vendor. The company may therefore have a clear incen-
tive to permit buyer due diligence. In a share deal, the threshold for authorising a
buyer due diligence can be higher. As the company typically is not party to a share
deal, it has less incentive to permit buyer due diligence.
Third, where the securities of the company have been admitted to trading on a
regulated market, selective disclosure is constrained by insider rules (Chapter 19).
(^20) § 93(1) AktG: ”Die Vorstandsmitglieder haben bei ihrer Geschäftsführung die Sorgfalt
eines ordentlichen und gewissenhaften Geschäftsleiters anzuwenden ...”
(^21) § 93(1) AktG: ”... Über vertrauliche Angaben und Geheimnisse der Gesellschaft,
namentlich Betriebs- oder Geschäftsgeheimnisse, die den Vorstandsmitgliedern durch
ihre Tätigkeit im Vorstand bekanntgeworden sind, haben sie Stillschweigen zu
bewahren ...”
(^22) For a very restrictive view, see Lutter M, Due Diligence des Erwerbers bei Kauf einer
Beteiligung, ZIP 1997 pp 613 and 617. For a summary of German law in English, see
Rittmeister M, The Management Board’s permission to disclose Due Diligence Informa-
tion Before a Corporate Acquisition in Consideration of the Impact of the Act to Im-
prove the Protection of Investors (Gesetz zur Verbesserung des Anlegerschutzes), Ger-
man L J 6(2) (February 2005).
(^23) § 93(1) AktG.