Answer ... (a) Commercial/corporate
The Liechtenstein Commercial Register provides information on natural persons and legal entities engaged in commercial transactions. While in some cases (for certain supporting documents) a justified interest must be proven, the issuance of a certified extract from the Liechtenstein commercial register can be requested by anyone.
Further, if a company engages a commercial agent, certain requirements must be met. For example, in case of termination of the contractual relationship by the company, the commercial agent may demand reasonable compensation if the company still derives significant benefits from customers acquired by the commercial agent.
(b) Financial
If the target offers financial services – either as a bank or as an insurance company – the relevant regulatory/reporting requirements must be complied with before and after the transaction. For example, if an insurance company is the target of an M&A transaction and the acquisition intended by the buyer reaches a certain percentage of the voting rights of the target, certain reporting requirements must be complied with according to Articles 92 and following of the Insurance Supervision Act.
(c) Litigation
Since Liechtenstein has concluded enforcement agreements only with Austria and Switzerland, and has not acceded to either the EU Brussels I Regulation (1215/2012) or the Lugano Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters 2007, court decisions from all countries other than Austria and Switzerland, in principle, cannot be enforced in Liechtenstein. Hence, usually a fast-track procedure (Rechtsöffnungsverfahren) is initiated in order to ultimately obtain a Liechtenstein execution title on the basis of a foreign judgment. Natural persons who do not have a permanent residence in Liechtenstein and who appear as plaintiffs in proceedings before the Liechtenstein courts must, in principle, provide security for the costs of the proceedings upon request according to Section 57(1) of the Civil Procedure Act. The same applies for legal entities which cannot prove that they are able to bear the defendant’s presumed costs of the proceedings, regardless of their registered office. These two peculiarities of Liechtenstein law can be both an advantage and a disadvantage for the buyer; but in any case they should be considered in the course of M&A transactions.
(d) Tax
As part of the due diligence process, the buyer should also pay particular attention to whether the target has paid all taxes in accordance with Liechtenstein tax requirements. Due to bilateral agreements concluded between Liechtenstein and Switzerland, various Swiss tax rules are also directly applicable. In addition, Liechtenstein has concluded double taxation agreements with a number of countries, including Austria, Switzerland and Germany.
(e) Employment
Due to its liberal labour law, Liechtenstein offers attractive framework conditions for employers. In addition to the individual employment contracts, there are branch-specific general employment contracts that must also be complied with. During the due diligence process, it should be investigated:
- whether all social security contributions for employees have been paid; and
- whether these are considered in the purchase price determination.
In the case of an asset deal, in the event of the transfer of a company or business, the employment relationship is transferred to the buyer ipso iure pursuant to Section 1173a, Article 43 of the General Civil Code. The target and the buyer are jointly and severally liable for outstanding claims at the time of the transfer. The employees affected by the transfer may reject the transfer of the employment relationship, whereupon the employment relationship will be terminated upon the expiry of the statutory notice period, but at the earliest upon the date of the actual transfer of the business. However, the transfer of the business is not a sufficient reason for termination by the seller or buyer.
(f) Intellectual property and IT
Liechtenstein forms a uniform protection area for invention patents with Switzerland, which is why Swiss patent law is also applicable in Liechtenstein. The Liechtenstein laws on trademark protection, copyright and related rights are also based on Swiss legislation. Since 2020, the Token and Trusted Technology Service Providers Act has been in force in Liechtenstein, which provides legal grounds for transactions based on blockchain technology. With the establishment of the Token and Trusted Technology Service Providers Act, Liechtenstein has positioned itself as a pioneer in the field of blockchain and became the first country in the world to enable the digitisation of rights. Should the target bear tokens, the legal handling of them is therefore easier in Liechtenstein than in other countries.
(g) Data protection
The EU General Data Protection Regulation and the Liechtenstein Data Protection Act provide a high standard of data protection. The various obligations must be complied with by the responsible party and the data subjects have numerous rights to control the protection of their data. The target’s compliance with these obligations and preservation of data protection must be considered in the course of the due diligence process.
(h) Cybersecurity
In Liechtenstein, there are no special regulations on cybersecurity. If the target has not yet taken appropriate precautions, the necessary adaptations must be considered during the due diligence process. The National Cybersecurity Unit offers further information on this topic.
(i) Real estate
In practice, real estate can make up a significant part of the target’s assets. Whether the target is actually the owner of the real estate and whether it is possibly encumbered by third party rights can be found out by inspecting the Land Register administrated by the Liechtenstein Office of Justice. Also, as Liechtenstein is a very small country, the Land Transfer Act imposes considerable restrictions and an approval obligation for the acquisition of real estate located in Liechtenstein.