Legal Question in Securities Law in New York

Question on Minority Shareholders/Due diligence

1) Is a company required to provide due diligence to a potential buyer of stock at the request of a selling (minority) shareholder?

To illustrate through a hypothetical example, I own 10% of the shares of Company A and want to sell my shares to John Doe. But before John Doe buys the shares, he wants to conduct due diligence on the company. Can I compel Company A to provide John Doe with the financial documents he wants in order to conduct due diligence before he buys?

2) If due diligence is provided to a potential purchaser during the course of the purchaser's due diligence investigation, is the purchaser subject to insider trading restrictions?

Does anyone have any idea how to go about answering these questions? I understand that any thoughts on the question will not be interpreted as official recommendations or legal advice. Thanks very much.


Asked on 6/03/07, 10:57 pm

3 Answers from Attorneys
William Pinzler william M. Pinzler

Re: Question on Minority Shareholders/Due diligence

Generally, yes, the company is required to produce financial information to someone who wishes to buy your 10% stake in the company (you can share your financial information with the potential purchaser as well). The potential purchaser is the recipient of what may well be inside information which would prevent him, her or it from purchasing or selling the stock of the company in which you own 10%.

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Answered on 6/04/07, 9:02 am
Carlos Gonzalez Gonzalez Legal Associates PLLC

Re: Question on Minority Shareholders/Due diligence

ALL this information can be gotten immediately from the copany or SEC website through prospectus documents and other regualr fiings the company MUST make - please feel free to contact our office for further assistance on this or any other matter - you may reach us at cgonzalezlawfirm.com or directly at 2127098303

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Answered on 6/12/07, 1:34 pm
Mark Tepper Mark A. Tepper P.A.

Re: Question on Minority Shareholders/Due diligence

1. No. Not required.

Usually the company will provide public documents or a link to them. Non-public documents are not generally provided.

2. Yes, if material, non-public information is obtained.

If you need any assistance in this regard, feel free to email my office for a personal response.

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Answered on 6/04/07, 3:35 pm


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