444 13 Due Diligence and Disclosures
As explained in Volume I, third parties such as shareholders to whom the fair-
ness opinion is passed can hardly ever make the provider of the fairness opinions
liable.
Community law. Fairness opinions are typical in acquisitions. Some external
opinions are required under EU company law directives and implementing legisla-
tion in: companies that participate in a merger (section 5.11.7); companies thar
participate in a division (section 10.4.4); and companies that issue shares for a
consideration other than in cash (section 5.11.2).^44 Whereas such statutory opin-
ions can be functional equivalents to “fairness opinions” in market practice, par-
ticular fairness opinions typically are not regarded as opinions required by the law,
as the latter must fulfil the statutory requirements.
EU securities markets law does not require the publication of external fairness
opinions or independent advice. For example, the Directive on takeover bids only
requires the publication of an offer document which reflects the opinion of the of-
feror’s board,^45 and the opinion of the offeree’s board.^46
Member States’ laws. Fairness opinions can be required by the provisions of
Member States’ national laws in the context of public bids^47 or otherwise. In some
countries, the publication of fairness opinions or independent advice is mandatory.
For example in England, Rule 3 of the City Code on Takeovers and Mergers
(Takeover Code) requires the board of the offeree company to obtain “competent
independent advice” on any offer and to make the substance of such advice known
to the company’s shareholders (Rule 3.1). Sometimes the board of the offeror
company has a similar duty (Rule 3.2). In France, Chapters I and II of Title VI
(Book II) of the General Regulation of the Autorité des marches financiers (AMF)
provides for independent appraisers and appraisals.
In many countries, external fairness opinions or the publication of independent
advice may be part of commercial practice, a way to signal the benefits of the
board’s proposal to shareholders, and a way to mitigate board members’ personal
liability.
US law. In the US, fairness opinions are routinely obtained by the boards of di-
rectors in corporate control transactions and address the fairness, from a financial
perspective, of the consideration being offered in the transaction. They were effec-
tively required in the Delaware case of Smith v. Van Gorkom.
The use of fairness opinions in deals has come under increased scrutiny. The
judgment of Delaware Court of Chancery in TCI shows that there may be circum-
stances where a fairness opinion given pursuant to a contingent fee arrangement
will not be considered independent.^48
(^44) See, in particular, Article 27 of Directive 77/91/EEC (Second Company Law Directive)
and Article 10 of Directive 78/855/EEC (Third Company Law Directive).
(^45) Article 6(2) of Directive 2004/25/EC (Directive on takeover bids).
(^46) Article 9(5) of Directive 2004/25/EC (Directive on takeover bids).
(^47) Article 3(2) of Directive 2004/25/EC (Directive on takeover bids).
(^48) See Cole J Jr, Kirman I, Takeover Law and Practice. In: PLI, Doing Deals 2008: Under-
standing the Nuts & Bolts of Transactional Practice.New York City (2008) pp 63–66.