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Due diligence requirements
What due diligence is necessary for buyers?
Depending on the type of transaction (asset deal or share deal), the buyer usually conducts legal, financial, technical or tax due diligence, including various question and answer sessions with the target’s management.
Danish law has no mandatory rule requiring due diligence; however, the possibility to file a claim against the seller may be limited in some cases if the buyer chooses not to conduct due diligence otherwise encouraged by the seller.
What information is available to buyers?
The Danish Company Register contains publicly available information, such as annual reports, articles of association and information on companies’ management.
Listed companies must disclose internal knowledge that may be considered price sensitive. Any information beyond that must be obtained from the target or seller.
What information can and cannot be disclosed when dealing with a public company?
The disclosure must comply with the Securities Trading Act and the EU Regulation on Abuse, which provides that disclosure can be made only if it is considered appropriate and in the shareholders’ interest. Further, disclosures are usually conditional on completing a non-disclosure and non-trading agreement, since the target would otherwise have to share the disclosed information with the public as well. Persons granted access to price-sensitive information through due diligence will be placed on the companies’ insider list and will thereby be prohibited from trading (except with other insiders and in connection with a public tender offer).
When submitting a public tender offer, the board of directors will often choose to publish a disclosure notice immediately where the inside information disclosed to the bidder during due diligence is revealed to the public.
How is stakebuilding regulated?
If a person acting alone or with others actively acquires shares in a listed company which carry sufficient voting rights to obtain control of the company (directly or indirectly), this person must submit a mandatory public offer to the remaining shareholders.
A person is considered to have control of a listed company when, directly or indirectly, it owns shares carrying one-third or more of the voting rights, unless it is evident that this shareholding does not give the shareholder control of the company.
Voting rights are calculated through unconditional call options and warrants, as well as the shares of the target and its subsidiaries.
Further, a shareholder that does not own shares carrying one-third of the voting rights will be considered to have control of a company when it:
- controls one-third of the voting rights through agreements with other shareholders;
- controls the company's operational and financial matters under the company's articles or through other agreements; or
- has the capacity to appoint or remove the majority of the board of directors.
A mandatory offer is not triggered if the acquisition is a result of a voluntary public tender offer, where the bidder obtains at least 50% of the voting rights.
Further, the Danish Financial Supervisory Authority may choose to exempt from the obligation to submit a mandatory offer under extraordinary circumstances – for example, if a takeover is executed through an increase of capital in a company in distress.
In addition to the rules regarding mandatory public offers, persons that possess more than 5%, 10%, 15%, 20%, 25%, 33.3%, 50%, 66.6% or 90% of the share capital or voting rights must notify the Danish Financial Supervisory Authority and the stock market (by notification to the target) as soon as possible after passing one of the mentioned thresholds.
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