13.3 Legal Requirements and Legal Constraints 435In both asset deals and share deals, such a duty can be based on non-dislosure
obligations under third party contracts. Breach of non-disclosure obligations owed
to a third party can trigger sanctions for breach of contract.
In both asset deals and share deals, a duty not to disclose information to the
buyer can also be based on mandatory provisions of law protecting third parties
such as customers and employees. For example, legal rules on privacy, data se-
crecy, and bank secrecy limit the right to disclose information to potential buyers
(Volume I).
Where the target is a company whose shares have been admitted to trading on a
regulated market, rules on inside information can restrict disclosure of information
(Chapter 19). First, the Directive on market abuse lays down an obligation for
Member States to prohibit persons who possess inside information from “recom-
mending or inducing another person, on the basis of inside information, to acquire
or dispose of financial instruments to which that information relates”.^13 This can
act as a constraint on the disclosure of information in a share deal (but not in an
asset deal). Second, Member States also have a duty to “prohibit any person ...
who possesses inside information from using that information by acquiring or dis-
posing of, or by trying to acquire or dispose of, for his own account or for the ac-
count of a third party, either directly or indirectly, financial instruments to which
that information relates”.^14 This can act as a constraint on the use by the buyer of
information selectively disclosed in a share deal (but not in an asset deal).
Particularly in share deals (in which the vendor and the target are not the same),
mandatory provisions of law can restrict the unauthorised disclosure of the target’s
trade secrets to a third party.
Vendor’s right to ask for information. The vendor cannot disclose information
that it neither possesses nor can obtain. In a share deal, the vendor does not have
automatic access to the books and other internal information of the target (as the
vendor and the target are not the same entity). For example, a shareholder has a
limited right to ask for information at the general meeting of a German AG,^15 but
the board may refuse to give information under some circumstances.^16 If the board
has made a selective disclosure to one shareholder, the same information must be
disclosed to the general meeting.^17 In a German GmbH, a shareholder may ask for
access to the books of the company,^18 but the managing directors may refuse to
permit access under some circumstances.^19 In any case, the exercise of such share-
holder rights may not be transferred or delegated to the prospective buyer of
shares.
(^13) Article 3(b) of Directive 2003/6/EC (Directive on market abuse).
(^14) Article 2(1) of Directive 2003/6/EC (Directive on market abuse).
(^15) § 131(1) and 131(2)AktG.
(^16) § 131(3) AktG.
(^17) § 131(4) AktG.
(^18) § 51a(1) GmbHG.
(^19) § 51a(2) GmbHG.