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?

Buy-side due diligence typically covers financial, tax, legal, commercial and operational matters, and, depending on the nature of the target’s business and the parties involved, may be expanded to strategic or special operational matters, or both (eg, environmental or technical due diligence). Unless a legal fact book is prepared by a seller in preparation for a transaction (which is typically done by private equity sellers in preparation for an auction sale process), due diligence reports are not disclosed to potential buyers. If a disclosure is made, it is always on a non-reliance basis.

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?

If a seller fails to inform a potential buyer about circumstances relevant to the transaction, it may incur liability for violation of pre-contractual duties or be exposed to a claim of the buyer for invalidation or adjustment of an agreement based on claims of error, or both (see question 10). It is customary to exclude such liability in the final sale and purchase agreement. However, such an exclusion of claims may in itself be subject to challenge if the party acted with wilful misconduct.

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?

Publicly available data are limited to information disclosed in the companies register, the land register and Ediktsdatei, the insolvency database.

The companies register provides information on, inter alia, shareholders of a GmbH, its managing directors, supervisory board members and annual accounts, and contains copies of the articles of association and other important corporate records (eg, on capital increases, mergers and de-mergers, etc). In the case of a stock corporation, information on shareholders can be obtained from the companies register only if there is one single shareholder, which must then be registered or (of more limited value) by reference to the most recent list of participants of the annual general meeting, which must be filed together with the minutes of that meeting. In addition, certain entries in the companies register are only declaratory, in particular as regards shareholders of a GmbH, so no reliance can be placed on them. In line with EU law, as regards disclosure of annual accounts, Austrian generally accepted accounting principles allow for limited disclosure in the case of small and medium-sized companies.

The land register shows who owns a certain plot of land and whether any encumbrances have been registered (eg, mortgages or easements). Searches in the land register by information on the owner only are strictly limited and are only permitted in very narrow circumstances. Thus, research as regards property ownership of a company needs to be backed up by due diligence information.

The insolvency database contains a record of whether and when insolvency proceedings have been opened against a person or company. It does not, however, provide a record of a filing for the opening of insolvency proceedings having been made, so a certain potential time lag needs to be taken into account.

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?

Except if otherwise agreed in a purchase agreement or in the case of an indemnity, a buyer’s knowledge of a defect would generally prevent the buyer from raising a claim for the relevant matter under Austrian civil law.

It is customary, however, that this statutory concept is amended or specified in private M&A transactions by the share or business purchase agreement (eg, by defining specifically that only the actual knowledge of the buyer and its relevant advisers about matters fairly disclosed during due diligence will exclude claims).