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?

The seller will usually grant the buyer access to a data room with information about the target company, business or assets. In line with legal custom in Danish private M&A transactions, the buyer will almost always conduct some sort of due diligence and not only rely on the contractual disclosures of the seller.

There has been an increase in the use of vendor due diligence reports in recent years, with financial vendor due diligence reports being more common than legal vendor due diligence reports. In auction processes, buyers and in some cases financing parties are sometimes given reliance on vendor due diligence reports, but often with very limited liability of the advisers having prepared the report.

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?

The seller can be held liable for pre-contractual or misleading statements under Danish law.

As a main rule, the parties can agree to exclude liability for pre-contractual or misleading statements, and the exclusion of pre-contractual statements is also in line with Danish market practice. However, the Danish courts may deem such an exclusion of liability void if it conflicts with general standards of reasonableness.

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?

The Danish Business Authority’s register contains basic corporate information about Danish companies and also provides access to published annual reports.

A number of Danish public registers contain information about title or encumbrances on assets, or both, including the Danish Land Charges Register, the Danish Register of Persons (which, for example, lists floating charges) and the Danish Motor Vehicles Securities Register. The database of the Danish Patent and Trademark Authority contains information about title to trademarks, patents, utility models and designs. The aforementioned registers are not necessarily fully updated, and may therefore not reflect the current legal ownership of the assets. There are no central registers on pending lawsuits or on guarantee commitments.

Overviews of authorisations granted by Danish authorities can often be found on the authorities’ respective websites.

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?

Owing to the principle of caveat emptor, the seller is, in principle, exempted from liability for claims that the buyer became aware of or should have become aware of based on a reasonable investigation of the target company, business or assets as requested by the seller. This general principle does, however, leave room for interpretation.

Danish purchase agreements will often list the information disclosed to the buyer and describe to what extent the seller’s representations and warranties are qualified by such disclosure. The prevailing Danish market practice is that information fairly disclosed to the buyer (including any such information in the data room) qualifies the seller’s representations and warranties. Disclosure letters are rarely used in Danish M&A transactions, but do appear in some transactions involving foreign buyers.