434 13 Due Diligence and Disclosures
amine the goods, or cause them to be examined, within as short a period as is practicable in
the circumstances.
Vendor’s right to permit buyer due diligence. As a rule, the vendor can permit
buyer due diligence of the object in an asset deal.
Whether such a contract is binding depends on through whom the buyer has
dealt with the vendor (for representation, see Volume II). For example, a lowly
employee does not have implied authority to permit buyer due diligence, but a
contract on the performance of a due diligence inspection is usually binding where
the buyer has dealt with the vendor through its statutory “organs”.^10
The internal decision-making of the vendor depends on the applicable company
law and the internal rule-making of the vendor (articles of association, internal
guidelines, internal decisions). Typically, a significant due diligence inspection
may not be decided on by the vendor’s sub-board executives but requires authori-
sation by the statutory board.
In a share deal, buyer due diligence of the target requires the target’s permis-
sion. Where the vendor and the target are not the same, the vendor can, for exam-
ple, undertake to procure that the buyer can perform a due diligence inspection of
the target.
Vendor’s duty to permit buyer due diligence. As a rule, the vendor does not
have a duty to permit buyer due diligence. Sometimes there is such a duty. This is
the case where the duty is based on a binding agreement between the parties (see
above). In a share deal, the main rule is that the target is not a contract party.
In rare cases, the vendor might have a duty to conclude an agreement permit-
ting buyer due diligence. For example, where two shareholders bid for the target’s
shares, permitting buyer due diligence by one but not by the other might be re-
garded as a breach of the principle of equivalent treatment of shareholders in the
same position depending on the governing law (Volume I).^11
Also in rare cases, the vendor may have a duty to disclose the same information
to the public. The Directive on market abuse requires “complete and effective
public disclosure” of inside information disclosed selectively to any third party “in
the normal exercise of his employment, profession or duties”, unless “the person
receiving the information owes a duty of confidentiality, regardless of whether
such duty is based on a law, on regulations, on articles of association or on a con-
tract”.^12 Such a public disclosure will nevertheless not amount to a duty to permit
a due diligence inspection.
Vendor’s duty not to disclose information to the buyer. Buyer due diligence is
sometimes constrained by the duty of the vendor not to disclose information to the
buyer.
(^10) Article 9(1) of Directive 68/151/EEC (First Company Law Directive).
(^11) See, for example, § 53a AktG.
(^12) Article 6(3) of Directive 2003/6/EC (Directive on market abuse).