Answer ... (a) Commercial/corporate
All of the regular issues, such as title and registration of officers. The publicly available Court Registry provides information on encumbrances and shares; while the Central Securities Clearing Corporation provides information on encumbrances on stock, such as pre-emptive rights, options and so on. A review of change of control clauses of major contracts is usually suggested, subject to their availability.
(b) Financial
This is usually supported by a warranty given by the seller that the financial statements are true. Most medium-sized to large companies have yearly audit reviews, which might be either publicly available or provided on request. All tax-related reports may be available through the e-tax system, which is compulsory for all companies.
(c) Litigation
Some information on litigation is available through local credit score providers, but this may be unreliable. Either litigation procedures and inspection procedures by authorities will be disclosed or the seller will give a warranty as to their non-existence. A materially relevant litigation or inspection procedure might be subject to additional focus in the due diligence review. The seller’s liability for non-material litigation is usually limited, to eliminate the need for in-depth due diligence.
(d) Tax
Tax-related warranties are the norm in M&A proceedings, as the Tax Authority has the power to reopen past tax reports. If such warranties are not given, specific tax due diligence may be conducted to identify price-sensitive past practices of the seller. In this case, access to e-tax reports may support a less demanding review process.
(e) Employment
Employment agreements are reviewed against a standardised employment contract, with a focus on non-compete clauses and branch collective agreements. A review of operational risk for post-termination claims must also be performed (eg, supplementary payments; overtime). The accuracy of past payroll calculations is usually verified by the tax adviser.
(f) Intellectual property and IT
All patents, trademarks and models are reviewed in the relevant IP registers (eg, the EU IP Office; TMview; the European Patent Office); any in-depth assessment must be outsourced to patent attorneys. Copyright of value requires more extensive due diligence of the supporting documents.
(g) Data protection
The target’s system of compliance with the EU General Data Protection Regulation will be comprehensively reviewed if the company’s business model relies on databases of personal data or data manipulation. If the target is a publicly traded company, ongoing compliance with the Market Abuse Regulation is mandatory and will be reviewed on a systematic basis (bylaws and policies on inside information).
(h) Cybersecurity
Several audit companies provide cybersecurity and IT assurance services, including a possible due diligence check. There are no inherent legal issues connected to this.
(i) Real estate
Real estate ownership and encumbrances are registered in the land register; hence, a review of excerpts from the register is mandatory if the target owns real estate. Public searches are also conducted on the estate cadastre and local authority land zoning e-portals.