Provision of information to the investor


The information which must be provided to the investor depends upon the stage of the process and the issue:

  • vendor’s disclosure requirements
    • DD before conclusion of contract
    • DD after conclusion of contract
    • purely informative nature of DD
    • vendor’s warranties
  • vendor’s duty of disclosure
    • material defects
    • legal defects
    • duty to provide information.

Vendor’s disclosure requirements

The kinds of disclosure depend upon the stage of the process:

DD before conclusion of contract

  • the investor may not bring any warranty claims at a later stage for faults identified in the DD1
  • the warranty does not apply for material defects which were not known to the investor, but which were recognisable2

DD after conclusion of contract

  • knowledge obtained in relation to the “DD before conclusion of the contract” is not relevant here
  • irrespective of any defects discovered in the “Postsigning DD”, under the terms of the contract of sale the investor is obliged to complete the purchase under identical terms.
    • suggestion: reservation subject to the condition precedent of “Satisfactory DD”
    • the investor may only withdraw from the contract in cases involving significant material faults and defects in title which would entitle the investor to rescind the contact or to annul it on the grounds of mistake.3
      • implementation without reservation, notwithstanding awareness of a significant fault, implies a waiver of the legal remedies specified above.

Purely informative nature of the DD

  • The vendor must specify all aspects in respect of which it wishes to exclude liability.
  • Means: Disclosure Letter
  • In such cases the applicability of Article 200 of the Swiss Code of Obligations must be set aside for material faults on the basis of the information provided in the Data Room, and with regard to defects in title the vendor warrants exclusively for known defects.4
  • Suggestion: the investor should inform the vendor of the circumstances establishing liability obtained from the DD, otherwise reliance on the exclusion of Article 200 of the Swiss Code of Obligations could be regarded as an abuse of a right.

Vendor’s warranties

  • If the vendor has warranted that the relevant faults would not (or no longer) obtain after Closing, the fact that the investor was aware of them, or should have been aware of them, will be irrelevant.
  • Level of care required
    • the vendor is not liable for material faults which the investor did not notice due to its own negligence.5

Further information

  • Attention: there is no effective guarantee in relation to the purchase of shares without an assurance
  • In cases involving share deals, the warranty rules do not apply to the business, but rather only to the securities.

Vendor’s duties of disclosure!

Material faults


No liability of the vendor for faults which the investor failed to notice due to its own negligence.


  • Assurance by the vendor that there were no such faults


  • Intentional failure to disclose the faults in question
    • non-disclosure will only be deemed to be intentional where the vendor has breached a duty of disclosure:
      • a duty of disclosure will apply if the vendor knows that the investor has overlooked a material fault which is significant for its decision to purchase and/or regarding the price.
      • a duty to inform will not apply if the faults are clearly apparent from the DD documentation.
        • Exception: The vendor realises that the investor has not noticed these faults.

Defects in title


The vendor is liable, irrespective of a duty of disclosure establishing responsibility and irrespective of the investor’s lack of knowledge due to its own negligence.

The breach of the vendor’s duty of disclosure has the effect of enhancing liability:

  • in the event of a blameworthy failure to disclose, the vendor will be liable for further damage resulting from the (full or partial) eviction.6

Duty of disclosure

The vendor will in all circumstances be subject to a duty of disclosure if the investor requests information:

  • the better and the more reliable the information available to the investors or buyers, the lower the risk discount in the business assessment will be
    • advantages:
      • additional revenue
      • shortening of the transaction process7
      • the vendor DD provides the investor with a significantly more comfortable negotiating position
      • reduction in the risk that the deal may be called off at a time when in investor interests are already affected
  • additional information for potential investors8 such as
    • the presentation of market data
    • the presentation of comparative data with competitor companies
    • fundamental market analyses.

1 See Articles 192(2) and 200(1) of the Swiss Code of Obligations. No warranty claims may subsequently be brought by the investor even if the vendor warranted the absence of such defects.

2 The investor may rely on assurances provided by the vendor in this case (Article 200(2) of the Swiss Code of Obligations).

3 Enhanced liability for material defects which would entitle the investor to rescind the contract or to claim a reduction in the price: liability of the vendor for further damage, Article 208(3) of the Swiss Code of Obligations for rescission and Article 97 for claims to reduction (BGE 82 II 139).

4 See Article 192(2) of the Swiss Code of Obligations.

5 See Article 200(2) Swiss Code of Obligations; unless the vendor has given assurances to the contrary.

6 See Article 195(2) of the Swiss Code of Obligations.

7 Secondary effect: the vendor DD is as it were a source of information for analysis and assessments by the vendor/its consultants, which may also enable the discovery of features of the business which render it more attractive for purchase.

8 This information goes further than a pure description of the business and should provide potential investors with the same level of knowledge, in order to avoid having to reach that level during contractual negotiations.

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