486 16 Key Provisions of the Acquisition Agreement
Fourth, the making of any additional payments to vendors after they already
have become shareholders in the acquirer can be constrained by rules on the mak-
ing of distributions to the acquirer’s shareholders.^89
16.6 Buyer Due Diligence After Closing, Claims
After closing and after the acquirer has obtained control, the acquirer should find
out whether the seller’s warranties are complied with. This makes commercial
sense, and can also be based on legal requirements.
Contract law. The acquirer should have ensured the survival of representations
and warranties in the contract (sections 16.2 and 13.3.3).
Under the legal background rules, the buyer may also have a duty to inspect the
object as soon as possible after closing.^90 Failure to do so can result in the buyer
losing the right to invoke certain facts as breach of contract.
There may also be a statute of limitations according to which the buyer must
notify the seller of breach of contract within a reasonable period of time.^91 If the
buyer fails to inspect the object, the buyer may not be able to do so.^92
Under German law, the buyer cannot invoke some remedies without setting an additional
period of time (Nachfrist) for performance by the seller.^93
Furthermore, if the buyer does not inspect the object immediately after closing, it
may become more difficult for the buyer to show that there was a breach of con-
tract at the time of closing (and that the circumstances which the buyer wants to
invoke as a breach of contract did not happen after closing and after the buyer had
become responsible for the object).
On the other hand, if the buyer has performed due diligence before closing and
there is no reason to assume that circumstances of the object would have changed
between due diligence and closing, it is possible that there is less reason to per-
form a similar due diligence according to good business practice and the govern-
ing law.
Contract. In order to mitigate legal risk, the parties should find out what the
governing law says about these matters. The acquisition agreement often sets out
the modalities for the use of indemnities including a clear last date for the making
of claims under the contract.
(^89) Article 15 of Directive 77/91/EEC (Second Company Law Directive).
(^90) See DCFR IV.A.–4:301 and section 31 of the Finnish and Swedish Sale of Goods Acts.
(^91) See CISG Article 39; DCFR III.–3:107.
(^92) See CISG Article 38.
(^93) § 440 BGB. See also CISG Article 47(1).