7.3.0 Introductie

The concept of due diligence' emerged from securities law. It also found its way to other areas of corporate law. Today, corporate lawyers spend much time on organising and performing due diligence investigations when they advise on establishing a merger between two or more companies; an acquisition of a business; a management buy-out (an MBO is the acquisition of a business by its existing management, usually in cooperation with outside financiers); an investment in another company (e.g. a private equity investment); or in setting up a joint venture with other parties. Some of these transactions take place through a capital market transaction, e.g. the issuing or sale of publicly traded securities or a public offer; others concern the preparation of a private transaction, i.e. a transaction that is not concluded via the stock exchange.

Divestments, selling off part of a business or a subsidiary company, or a privatisation, e.g. through organising a controlled auction', also involve due diligence investigations. A controlled auction is a process whereby the company is marketed to a specific target group, creating a process where multiple potential buyers can bid for it. The seller controls the process. Before the auction begins, commonly, the seller performs a due diligence assessment on the basis of which a so-called Information Memorandum' is prepared concerning the business and particulars of the business or company for sale (i.e. the seller's due diligence'). Potentially interested parties receive the Information Memorandum and they can then make a preliminary price offer for the business concerned. In a second phase, the seller narrows down the list of potential bidders to a few preferred bidders. They are given access to the documents collected in the seller's due diligence process in order to conduct their own due diligence investigation (i.e. the ' buyer's due diligence'). Based on this information, these bidders will confirm their preliminary bid or withdraw from the process. Ultimately, the seller will decide with which party it enters into the final negotiations.

Furthermore, finance transactions usually involve a due diligence investigation as well as situations in which companies enter into a large operational agreement, such as an exploration or exploitation agreement (e.g. concerning natural resources); a management agreement (e.g. the exploitation of a chain of cinemas or hotels); turnkey projects (e.g. building a power plant); transport contracts; and infrastructural contracts (e.g. building a bridge, a road or constructing a gas or oil pipeline).

There are multiple reasons for a company to perform a due diligence investigation. Some are embedded in legislation or stock exchange rules, others are of a more practical nature. The results of a due diligence process can assist the negotiators in shaping the deal, and will uncover any material risks. The following subsections will provide an answer as to why, how and when companies perform a commercial due diligence investigation in order to create a base for reflecting on the question whether a human rights assessment could be integrated in such a process. The next subsection will first explain which actors can be involved in a due diligence process.