Surviving due diligence

What due diligence (selskapsgjennomgang) is for

Due diligence checks the information given to investors and looks for undisclosed issues that could change the investment case. Many document requests can be anticipated, but scope and duration depend on the company and findings.

Alongside the investment decision, prepare for the conditions and obligations that diligence can produce:

1. Decision. Whether to invest.
2. Conditions. What must happen before completion or afterwards.
3. Risk allocation. Which party gives each warranty, what it covers and what remedy applies if it is breached.

A detailed review need not signal distrust. Once invested, capital can be difficult to recover and later claims are no substitute for understanding the risks. Raise material issues early rather than relying on investors to discover them.

The questions are known in advance

Three common areas are legal, financial and commercial diligence. The company may also need technical, regulatory or other specialist review. Clarify who is checking each area and which evidence they need.

Investors can obtain substantial public information before contacting you. Check the records yourself and explain relevant gaps or errors. Do not assume a public register is complete or current.

• The company certificate, the articles, the registered roles and the share capital, in the Register of Business Enterprises.
• The filed annual accounts, in the accounts register.
• Shareholder data, in Skatteetaten’s shareholder register.
• Bankruptcy and role histories. Access to beneficial-owner registrations is restricted; check eligibility or request the company’s registration evidence.
• Your own share register. Since aksjeloven § 4-6 anyone may demand access to it, and since 1 February 2025 the company must in the ordinary case send an electronic copy by e-mail within three business days, free of charge.

Other material must come from the company: minutes, shareholder agreements, option and conversion terms, employment and commercial contracts, internal accounts and forecasts. Findings can arise from these, public records, interviews and specialist investigations.

The four findings investors expect in a founder company

Use these four areas as a preparation checklist. Early clarification can reduce delays and make the remaining risks easier to explain; it does not guarantee a particular valuation or outcome.

Some issues can be corrected before diligence; others require consent, time or a change of plan. Compare the cost of fixing them with the remaining risk and disclose unresolved matters.

• Shares. Reconcile issued shares in the share register and cap table. Show options and possible conversions separately. Document disputed or unclear rights rather than assuming an unsigned claim does not exist. Check the existing shareholder agreement.
• Formalities. Arrange written employment contracts before work starts. Under section 14-5, employment lasting more than one month requires a written agreement as soon as possible and within seven days; shorter employment and labour hire require an agreement immediately. Record decisions when made and file accounts on time. Late filing can incur a fee. Under Accounting Act section 8-3, board members can become jointly liable if the company fails to pay within three weeks of the registry demand, subject to the statutory limits and relief provisions.
• Founder dependence and IP. Establish who owns each right and what the company needs to use. Employee software is covered by Copyright Act section 71, with its scope and exceptions. Employers may acquire rights to employee inventions under the conditions in the Employee Inventions Act. Other rights depend on the work, employment relationship and agreements. Document necessary assignments or licences, including work created before incorporation and by contractors; do not assume every asset must be owned outright.
• Contracts. Separate recurring and one-off revenue, clarify important commercial terms and identify change-of-control provisions.

Business diligence is a conversation about the future

Legal and financial diligence rely on documents. At early stage, business diligence has few hard facts to work from. The method developed by Christian Wig of Pivotic treats a business due diligence of a startup as an examination of beliefs about the future, worked through in this order:

1. The business model.
2. Strengths and weaknesses.
3. Risk.
4. Trends.
5. A prioritised set of issues and opportunities.
6. The strategic options, and the assumptions underneath them.

It is run as workshops with the founders inside the diligence process, with feedback rounds, and the output is a shared view of what has to be true for the company to work.

Use the workshops to test your plan and record assumptions you can revisit as the business develops. Treating them only as an examination misses that opportunity.

Investors may assess your willingness to consider evidence and change your mind. Explain disagreements and ask for the reasoning behind suggestions. Being open to advice does not mean accepting every investor proposal.

How to answer: fast, written, honest about the bad parts

Good organisation on your side can reduce avoidable delays. Timing also depends on investors, advisers, the scope of work and the findings.

• One coordinator. Keep the document list and allocate questions to the person with the relevant knowledge. Check consistency before responding.
• Written answers. Keep a numbered log with answers, dates and supporting documents. Reuse accurate answers where sharing is permitted.
• Early disclosure. Explain material problems and proposed remedies. Agree their contractual treatment; disclosure alone does not settle price or liability.
• No improvisation. Say what you need to check and give a realistic response date. Correct earlier errors openly.
• Current data room. Preserve filed documents as filed, adding corrections or explanations separately. Date management accounts, cash figures and forecasts so investors can distinguish periods.

Keep these habits throughout the raise, but adapt your preparation to your experience and whether a lead investor is involved.

• First raise. Prepare the data room before meetings, using the public records and four areas above as a starting point. Allow for further questions.
• Later raise. Update the previous question log. New investors may ask different questions as the company and market change.
• With a lead investor. Agree the scope, recipients of findings and whether other investors may rely on the work. Sharing and reliance are not automatic.
• Without a lead investor. Coordinate parallel requests with a common document set, question log and named coordinator. Apply appropriate access restrictions.

Investors may also check references. Agree whom they will contact and why. Personal-data processing needs a lawful basis and must comply with data-protection rules; agreeing a practical process does not remove those requirements.

Beyond that the Norwegian framework is narrower than founders sometimes assume. A criminal-records certificate (politiattest) may only be demanded where a statute authorises it, so no investor can require one from you at will.

A personal credit check requires a legitimate need. The person must normally receive a copy or notice under section 18, subject to specified exceptions for certain debt collection and financial-institution checks. Public company and insolvency records can provide relevant background, but access and available history vary.

Findings become terms

A finding can have several consequences, depending on its significance and the agreed terms:

• The investor changes or withdraws the investment decision.
• A condition must be met before completion, such as a signed licence or settlement of an obligation.
• The parties adjust price or agree a warranty, indemnity or later corrective action. Specify who is responsible.

Read proposed warranties early. Their scope varies. Examples of subjects to check are:

• Ownership or adequate licences for the relevant intellectual property, and disclosed third-party claims.
• The accuracy of tax and VAT information, including unpaid or disputed amounts.
• The status of material contracts.
• Existing or threatened disputes.
• The accuracy and completeness of material information. Check knowledge qualifications, disclosed exceptions and the consequences of breach rather than assuming every warranty is absolute.

Who gives the warranties. An investor may request warranties from the company, founders or both. A personal founder warranty can expose private assets. Establish who owes any remedy and whether liability is individual or joint; personal liability does not follow automatically from being a founder.

If the parties propose compensatory shares, distinguish a transfer of existing shares from an issue of new shares. A new issue needs valid corporate steps, funding or lawful set-off of the subscription obligation, and registration. It may dilute other unprotected shareholders as well as founders. Do not assume this is the standard remedy in Norway.

Company-only warranties are one possible negotiating model. Davis Polk’s account of the 2023 BVCA model describes that approach for UK post-seed investments. This is a historical comparison, not a Norwegian rule. Assess the actual agreement and any separate founder obligations.

Limits and deadlines. Negotiate a clear liability cap, claim-notification deadlines and disclosed exceptions. These contractual terms are separate from statutory limitation: the general period is three years, with starting points under section 3 and possible extensions, including lack of necessary knowledge under section 10. Have the adviser check how the rules interact for each claim. Merely disclosing an issue does not automatically exclude it from a warranty; record its agreed treatment.

Running your side of the timeline

Your exposure during diligence depends on when it takes place in the transaction. Two sequences are in use.

• Term sheet first. Identify which provisions bind the parties. Investment terms may be non-binding while exclusivity, confidentiality, costs or dispute provisions bind. Diligence may then inform the final agreement; a term sheet alone need not commit the investor to fund.
• Investment agreement first. Diligence can be a completion condition. Certainty depends on the wording: required findings, deadlines, waiver rights, termination and costs. Signature does not guarantee completion if broad conditions remain.

One possible sequence is term sheet, diligence, final investment and shareholder agreements, then completion. Choose the sequence with attention to binding obligations and the risk of delay.

For planning, you might allow two meetings with founders and two among investors, alongside document review. This is an example, not a measured standard or a sufficient scope for every company. Agree the actual tasks, people and dates.

Exclusivity can restrict new approaches and ongoing investor discussions. PwC’s 2021 report recorded it in 147 of 187 final VC term sheets from 2020 (79%). The historical UK sample covered several funding stages; it does not establish current Norwegian angel practice.

Negotiate a period proportionate to the work, with clear milestones and objective ending conditions. An automatic end for missed milestones applies only if agreed; do not assume investor silence releases you.

Maintain other investor contact only as the exclusivity and confidentiality terms permit. Agree necessary exceptions before signing. Silence may have several causes; ask for status rather than assuming the investor is simply busy.

If work stalls, identify the remaining tasks, who is responsible and what is blocking progress. Agree a revised timetable and consider alternatives if the parties cannot resolve the delay.