As with many other jurisdictions, it is common practice in the Netherlands to carry out an extensive due diligence exercise on a target company prior to entering into a business/share purchase contract or a contract regarding an investment/equity investment.
Usually the purchaser/investor will want the results of the due diligence investigation to remain confidential and will therefore not wish to provide other parties involved with a copy of the (entire) due diligence report. However, for these other parties, the findings of the due diligence investigation can be equally important and may sometimes represent conclusive evidence in discussions and/or civil court proceedings concerning liability under warranties issued by these parties. For instance, if it can be proved that certain facts leading to an alleged breach of a warranty had already been disclosed in the due diligence report, it will be difficult for the purchaser/investor to state that he did not know or could not have known that the breach of warranty was likely to occur.
Under Dutch law, the purchaser/investor can be forced to provide to a third party involved in the transaction a copy of the due diligence report, if inter alia (i) the party has a legitimate interest; and (ii) the report relates to the legal relationship between the purchaser/investor and the other party. Dutch attorneys at law (‘advocaten’) and civil law notaries (‘notarissen’) have a right of nondisclosure (‘verschoningsrecht’), which means that they cannot be forced to hand over a due diligence report. It should be noted that other advisors, such as auditors or tax advisors cannot in general invoke such a right.
It can be argued that the part of a due diligence report that has an advisory character relates to the legal relationship between the purchaser/ investor and his advisor(s) (and not to the legal relationship between the purchaser/investor and the other parties involved) and therefore the purchaser/investor cannot be forced to hand over such part of a due diligence report. For this reason, it may be advisable to split the advisory part of a due diligence report from the part that is merely reporting on the factual background of the target company.
It is reasonable to expect that clients of a Dutch attorney at law or civil law notary derive rights of non-disclosure in relation to the advisory part of a due diligence report that has been prepared by their attorney at law and/or civil law notary. However, as yet, the Dutch courts have not given a clear decision on this matter.