Denmark’s Due Diligence Procedures: A Guide to Financial Transactions

When conducting financial transactions in Denmark, it is crucial to perform thorough due diligence to ensure that all parties involved are aware of any potential risks or liabilities. In recent years, the use of vendor due diligence reports has increased, with financial reports being more common than legal ones.

Conducting Due Diligence in Danish Private M&A Transactions

In Danish private M&A transactions, buyers typically conduct their own due diligence and do not solely rely on contractual disclosures from the seller. This includes accessing a data room provided by the seller to gather information about the target company or assets.

• Buyers may also carry out standard searches in various registers to ensure they have a complete understanding of the target company or assets.
• These registers include the Danish Business Authority’s register, which contains basic corporate information and annual reports, as well as those for title or encumbrances on assets, trademarks, patents, and designs.

Liability for Pre-Contractual or Misleading Statements

While parties can agree to exclude liability for pre-contractual or misleading statements, courts may deem exclusion void if it conflicts with general standards of reasonableness. Therefore, buyers should be aware of the potential risks involved in not conducting thorough due diligence.

Publicly Available Information

Publicly available information on private companies and their assets can be found in various registers, including:

• The Danish Business Authority’s register
• Registers for title or encumbrances on assets
• Registers for trademarks, patents, and designs

Additionally, overviews of authorizations granted by Danish authorities can often be found on their respective websites.

The Principle of Caveat Emptor

In Denmark, the principle of caveat emptor applies, which means that sellers are generally exempt from liability for claims that buyers became aware of or should have become aware of through a reasonable investigation. However, this general principle leaves room for interpretation.

Disclosure Letters and Purchase Agreements

Danish purchase agreements typically list the information disclosed to the buyer and describe how it qualifies the seller’s representations and warranties. Disclosure letters are less common in Denmark but may appear in transactions involving foreign buyers.

Conclusion

Conducting thorough due diligence is essential for parties involved in financial transactions in Denmark. By understanding what information is publicly available and how liability works, buyers can make informed decisions and protect themselves from potential risks or liabilities.