Due Diligence in Share Acquisitions: Navigating the Insider Trading Regime

Journal of Business Law, 2017, Issue 3, 237-259

NUS Law Working Paper No. 2016/004

NUS - Centre for Law & Business Working Paper No. 16/01

31 Pages Posted: 6 Apr 2016 Last revised: 13 May 2017

Umakanth Varottil

National University of Singapore (NUS) - Faculty of Law

Date Written: April 6, 2016

Abstract

The goal of this paper is to unpack the underlying friction between the need to facilitate due diligence in share acquisition transactions that could place inside information in the acquirer’s hands, and at the same time to ensure that such information is not misused by the acquirer to the detriment of the other shareholders, a matter that insider trading regime regards as sacrosanct. In analysing and seeking to resolve this tension, this paper draws upon examples from three jurisdictions, namely the United Kingdom (UK), Singapore and India. The core argument of this paper is that from a theoretical perspective the due diligence objective of acquirers can be reconciled with the goals of the insider trading regime in order to preserve the interests of the target shareholder as long as certain restrictions are placed on the conduct of the acquirer.

Keywords: Due diligence, insider trading, parity of information, takeover, market-sounding, wall-crossing

Suggested Citation

Varottil, Umakanth, Due Diligence in Share Acquisitions: Navigating the Insider Trading Regime (April 6, 2016). Journal of Business Law, 2017, Issue 3, 237-259; NUS Law Working Paper No. 2016/004; NUS - Centre for Law & Business Working Paper No. 16/01. Available at SSRN: https://ssrn.com/abstract=2759771 or http://dx.doi.org/10.2139/ssrn.2759771

Umakanth Varottil (Contact Author)

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore

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