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?

Due diligence is conducted with the purpose of providing potential buyers with the opportunity to evaluate the actual condition of a company or asset. The typical full-blown legal due diligence will usually confirm the company’s compliance with law, legal ownership, the legality of its establishment, articles of association, shareholding and capital structure and its historical background, authorised company organs, material licences and fulfilment of obligations (ie, regarding employment, tax payment, environment), material agreements, assets (ie, intellectual property rights, physical assets), insurance and litigation. However, there are several cases whereby the buyers would request for only a limited scope of due diligence. Buyers usually conduct their own due diligence rather than rely on the due diligence report produced by the seller.

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, with the exception of fraudulent misrepresentations, sale and purchase agreements usually limit a seller’s liability to claims for breach of contract and exclude liability for pre-contractual and misleading statements. Practice differs widely according to the nature of the transaction and the parties, but it is customary for the buyer to confirm that it has not relied on any representation outside the contract.

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?

In Indonesia, there is no requirement for private companies to make their information publicly available. However, it is possible to obtain certain information about a company, such as:

  • from the General Law Administration of the Ministry of Law and Human Rights: information on the:
    • deed number of the company’s deed of establishment;
    • deed number of the company’s articles of association;
    • current shareholding structure and historical shareholding structure;
    • shareholding composition; and
    • board of directors and board of commissioners;
  • from the Supreme Court website or the Registry of District Court: information regarding legal proceedings;
  • from the Land Office: land registration certificate which includes the information on the registered name of the land owner, area of the land, land title, security over the land; and
  • from the Directory of Intellectual Property Rights: information on the ownership and status of intellectual property.

A buyer will typically carry out, before entering into an agreement (as applicable), the search of information above as a cross-reference check against the information provided by the seller.

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?

A buyer’s knowledge at the time of entering into an acquisition may preclude claims being brought against the seller in respect of relevant representations, warranties and covenants. Parties generally are free to modify this principle and set out the way in which actual or deemed knowledge of the buyer may or may not affect any claims afterwards.