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Due diligence requirements
What due diligence is necessary for buyers?
Due diligence is not strictly mandatory under Dutch law. However, acquisitions are generally preceded by a due diligence investigation into, for example, financial, legal and tax matters.
The purpose of the due diligence investigation is to determine, among other things:
- whether to proceed with the transaction;
- the appropriate valuation;
- the optimum transaction structure; and
- any required warranties, indemnities or consents.
Under long-established Dutch case law, a buyer has a duty to investigate the object of its purchase and, in the absence of such investigation, may be limited in its potential claims on the seller. However, the buyer may rely on statements made by the seller and has no specific duty to verify such statements.
What information is available to buyers?
The information available to a buyer depends on whether the target is listed or non-listed.
In case of a non-listed company, certain limited information is available from public registers, including the commercial register (eg, annual accounts and articles of association). More extensive disclosure obligations apply to listed companies under applicable legislation, including the obligation to provide regular trading updates and disclose price-sensitive information; therefore, more information is publicly available.
In the context of a friendly M&A transaction, the seller typically provides information to the buyer on the basis of a due diligence request list prepared by either the buyer or the seller's advisers.
What information can and cannot be disclosed when dealing with a public company?
Any non-public information which if disclosed could significantly affect the price of the securities issued by a listed company (price-sensitive information) must be made generally available immediately. Disclosure of price-sensitive information may be delayed if:
- the delay serves a legitimate interest of the company;
- the delay is unlikely to deceive the public; and
- the company can guarantee the confidentiality of this information.
As a result, extensive confidentiality agreements (potentially including a standstill) are typically entered into pursuant to which price-sensitive information can be provided to the potential buyer. Disclosure of price-sensitive information may no longer be delayed if, despite any measures taken, confidentiality is not guaranteed (eg, a leak becomes apparent).
As long as a potential buyer has price-sensitive information, the potential buyer is prohibited from trading in securities issued by the company.
How is stakebuilding regulated?
Subject to insider dealing restrictions and transparency requirements, a potential buyer may acquire shares in a listed company before the announcement of a public offer and enter into irrevocable undertakings with significant shareholders. However, a potential buyer is prohibited from trading in securities issued by the company as long as it has price-sensitive information. If a potential buyer (either alone or acting in concert with others) acquires 30% or more of the voting rights in a listed company, a mandatory offer may be triggered.
Following the announcement of a transaction, a potential buyer may continue to acquire shares, but each transaction (and the main terms thereof) should promptly be publically disclosed. This information should also be included in the offer document.
If the shareholding or voting rights of a potential buyer cross certain thresholds (currently 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%), a filing should be promptly made with the Dutch financial regulator. All filings are listed on the regulator’s website and are regularly reported in the media.
Following a public offer, the buyer may not acquire shares on better terms for one year.
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