Optimistic management accounts as a transaction liability

The label does not determine the exposure

A forecast is an estimate of future performance based on stated assumptions. A projection may model a particular commercial case, while a statement of fact represents that a present or past circumstance exists. The distinction matters because an information memorandum or management presentation can blur those categories through its wording, graphs, headline figures and qualifications.

A forecast that does not materialise is not, by that fact alone, misleading. The relevant questions are what was represented when it was circulated, what assumptions supported it, whether those assumptions were recorded and whether the surrounding presentation gave a fair account of material uncertainty. A statement that current order intake, cash, margin or pipeline status is a fact calls for a different evidential basis from a clearly identified scenario.

The same discipline applies to interim management accounts. Monthly figures can be prepared for operational purposes and later become transaction material when they are shared with prospective buyers, lenders or insurers. The source data, review process, adjustments and later revisions should therefore be capable of explanation at the time the figures enter the process.

The statutory framework addresses misleading information

Art. 2:139 / 2:249 DCC addresses, for the NV and the BV, the liability of directors for misleading financial information made public by the company. That regime concerns the financial information specified in the statute, and its application depends on the facts and the form in which the information was made public. It should not be presented as a transaction-specific warranty regime.

Case law on this liability shows that interim financial information also matters, for example where a financier relied on misleading interim figures. Such decisions do not necessarily concern an M&A process. Applying that reasoning to an information memorandum or management presentation therefore remains an analysis of the particular transaction facts.

Other routes may also be relevant. The director's duty towards the company can matter where the preparation or approval of transaction information forms part of the board's task. There is also general liability in tort, the rules on misleading public statements in the course of a profession or business and, for a buyer, an assertion of mistake (dwaling) where the requirements are met.

These routes differ in claimant, threshold, remedy and factual focus. The SPA will add its own warranty and indemnity framework, usually directed at the seller, while a claim based on pre-contractual information may be argued alongside it. The contractual allocation should therefore avoid unintended inconsistency between the disclosure exercise, the warranty package and statements made in the sale materials.

Board responsibility depends on the process and the evidence

Dutch board responsibility is collective, but an individual director may have scope for exculpation where the relevant task lay outside that director's remit and no serious failure of supervision is attributable to that person. Whether that position is available turns on the actual division of tasks, the information received, the challenge applied and the steps taken once concerns arose. A job title alone is unlikely to answer those questions.

The board minutes are often the clearest contemporaneous record. They should identify the management accounts or forecast considered, the assumptions and sensitivities discussed, material deviations from budget and the decision to approve circulation in a particular form. They should also record whether qualifications, updates or restrictions on reliance were agreed.

A board need not turn a management presentation into audited accounts. It does need a process proportionate to the importance of the information and the audience that will receive it. Where figures are uncertain, the presentation can distinguish historical results, management's current estimate and illustrative projections, provided the words and supporting materials do not pull in different directions.

Sale materials and disclosure should tell one story

The information memorandum, quality of earnings report, management accounts and management presentation should be reconciled before the process opens. Each document may have a different purpose and level of analysis, but material differences in revenue, EBITDA, working capital, pipeline or assumptions require explanation. A version-controlled model, a source-data folder and a log of changes make that explanation practical.

Caveats work where they are specific, visible and consistent with the principal message. A general disclaimer cannot safely correct a precise factual assertion that is known to be incomplete, nor can it turn a historic figure into a forecast. The disclosure letter should identify matters qualifying warranties with sufficient clarity under the SPA's agreed disclosure standard, while recognising that a disclosure may not resolve a separate allegation concerning a misleading presentation.

The seller's warranty package should distinguish statements of fact from forward-looking information and should align knowledge qualifiers with the transaction record. The buyer's diligence questions, management answers and disclosed materials should be preserved in a controlled record. That record is relevant both to the contractual claim analysis and to any later argument about what was communicated and relied upon.

The twelve-month preparation record

The strongest preparation begins before a sale mandate is signed. In the twelve months before a process, the board can establish a regular reporting calendar, retain the assumptions behind budgets and forecasts, document significant changes in trading and ensure that management accounts reconcile to the underlying ledger. These measures improve decision-making as well as the later transaction record.

The pre-process checklist should cover the ownership of the financial model, approval of each material version, the source of headline operating data, review of non-recurring adjustments and reconciliation of pipeline reporting. It should also identify which assumptions are management views, which are contractual facts and which require a qualification in sale materials. A controlled process gives the board a sound basis for a clear and workable presentation of the business.

Once a mandate starts, the same record should govern the information memorandum, data room and management presentation. Updates should be dated, material changes should be communicated through the agreed channel and superseded versions should remain identifiable. This is not a guarantee against a dispute, but it places the legal and factual analysis on evidence rather than recollection.