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 in other jurisdictions, the scope of due diligence can vary widely, typically depending on the amount and risk profile of the investment. Matters that are typically covered include corporate structure and organisation, permits and licences, litigation and government investigations, finances, material contracts, intellectual property, and employee matters. Buyers are expected to conduct their own due diligence, including preparation of due diligence reports.

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?

As the Civil Code of Taiwan recognises a pre-contractual duty to act in good faith, a seller can be liable for pre-contractual or misleading statements. The transaction documents may include a provision that limits seller liability only to those express representations and warranties in the definitive agreements, but a court may find that such limitation should not apply where there is evidence of fraud or bad faith.

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?

Limited basic corporate information is available for all Taiwan companies, including the total authorised and issued share capital, and the names and respective shareholdings of directors and supervisors. Notably, full shareholding information is not publicly available, unless all of the shares are held by the directors and supervisors.

Additional searches can be performed to check for litigation records or administrative penalties, but such publicly available information is limited and may not be complete.

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 a buyer has knowledge of circumstances that constitute a claim before signing, the seller may be able to defend against liability in regard to this claim, but because enforcement of such provisions has not been significantly tested in the courts, it is generally advisable that the parties should carefully define the coverage of knowledge to avoid any unnecessary disputes.