Due diligence and disclosure

Scope of due diligence

What is the typical scope of due diligence in your jurisdiction? Do sellers usually provide due diligence reports to prospective buyers? Can buyers usually rely on due diligence reports produced for the seller?

As part of the legal due diligence, legal counsel to the acquirer will typically review and confirm the capitalisation (share ownership) of the target company, terms of commercial agreements, terms of financial obligations, ownership and use of intellectual and real property, physical assets, employee agreements and benefits, litigation, regulatory issues and compliance with law.

In certain cases, typically when bankers manage a tender process (although it is not common market practice), sellers would provide due diligence reports to prospective buyers.

Liability for statements

Can a seller be liable for pre-contractual or misleading statements? Can any such liability be excluded by agreement between the parties?

A seller can be liable for pre-contractual misrepresentations although, except with respect to fraudulent misrepresentations, sale and purchase agreements would usually exclude liability for pre-contractual and misleading statements.

Publicly available information

What information is publicly available on private companies and their assets? What searches of such information might a buyer customarily carry out before entering into an agreement?

Israeli companies are required to make filings with the Registrar of Companies that are made publicly available online. Details appearing in the Registrar of Companies include:

  • the company’s certificate of incorporation;
  • the company’s articles of association;
  • details of share ownership;
  • list of members of the board of directors;
  • liens over the company’s assets; and
  • whether or not the company is in liquidation process.

Details of the ownership of real estate can be obtained at Tabu. Information on registered intellectual property may be obtained from the Israeli or any other relevant patent and trademark office.

A buyer of a company will typically carry out a search of the information filed with the Registrar of Companies. Searches may also be made with the Israeli Liens Registrar, or in litigation databases to find out if the target company is a party to any litigation proceeding. Nominal fees are generally payable to carry out such searches.

Impact of deemed or actual knowledge

What impact might a buyer’s actual or deemed knowledge have on claims it may seek to bring against a seller relating to a transaction?

In general, if the purchase and sale agreement does not explicitly provide that an acquirer is precluded from making claims with respect to matters about which it has knowledge at the time of the agreement, claims would not be excluded.