due diligence defense
The term due diligence defense , which comes from American law, describes a special form of defense of the defendant against a prospectus liability suit in capital market law .
background
When raising capital on a capital market , the issuer of securities in the European Union may be obliged to prepare a securities prospectus. This obligation follows from the so-called “Prospectus Directive” (2003/71 / EC), which the member states of the European Union had to implement into national law by July 1, 2005.
In Germany, the directive was implemented through the Securities Prospectus Act (WpPG). According to Section 3 of the WpPG, an issuer of securities that are to be offered on an organized market is obliged to prepare a prospectus that provides information to residents. In the case of a share issue, for example, the prospectus must contain the company's last three annual financial statements . Special regulations in other laws extend this obligation to bond issues and certain issues on the gray capital market .
If it turns out that the prospectus is incorrect or incomplete, the issuer is liable to the investors for the damage incurred in accordance with Section 21 WpPG. Similarly, a bank is liable, when submitted according to § 30 para. 2 of the Exchange Act in connection with § 5 para. 4 WpPG as emission companion has claimed responsibility for the prospectus.
In order to avoid liability, the issuer has a great interest in only publishing a complete and correct prospectus. He therefore carries out a so-called due diligence check on the issuer to ensure that the information in the prospectus is complete and correct. This is to avoid a prospectus liability suit in the run-up to the IPO.
due diligence defense
If the issuer does not succeed in preventing a prospectus liability suit through the preventive due diligence process, he has the option to defend himself against liability in the process. This defense is called due diligence defense .
American origin
The due diligence defense has its origins in US law, it is based on section 11 (b) (3) (A) Securities Act of 1933 . According to this regulation, a complained issuer in the USA can claim that they did everything necessary and reasonable in advance of the issue in order to avoid a prospectus error.
Legal situation in Germany
In Germany, on the other hand, it is not possible for an issuer to plead directly that he has made all necessary and reasonable efforts to prevent a prospectus error.
On the other hand, he has the opportunity to prove that he is not at fault . According to German law, the due diligence defense is therefore slightly modified compared to the US model - the examination itself is not sufficient for exoneration, but it can refute the accusation of fault.
This is all the easier in Germany as the defendant must have acted at least with gross negligence for liability under Section 21 WpPG, see Section 23 WpPG. According to the controversial but prevailing view, gross negligence is no longer the responsibility of the emissions monitor if an independent expert who has particular expertise has confirmed the information in the prospectus to the emissions monitor as correct.
These consultants include, for example, lawyers, auditors or tax advisors. Since such consultants are called in for a large number of prospectus information during a due diligence check, it is often possible for the issuer to avoid liability. In contrast, the issuer himself usually does not succeed in proving the exoneration. Since he knows best about his own company, he is regularly guilty of gross negligence.
literature
- Mathias Habersack, Peter O. Mülbert, Michael Schlitt (eds.): Corporate financing on the capital market . Otto Schmidt, Cologne 2005, ISBN 3-504-40062-5 .
- Wolfgang Groß: Capital market law . 3. Edition. CH Beck, Munich 2006, ISBN 3-406-54021-X .
