You are at the crux of an important business decision. Should you commission a due diligence report before making your final choice? The information below should help you find out.
When Do You Need a Due Diligence Report?
The preparation of a thorough due diligence report is a critical step to take early on in a wide array of high-stakes corporate and financial transactions. Examples include:
- Debt financing
- Public offering of securities
Who Should Get a Due Diligence Report?
Legal due diligence is a formal investigation into a company’s affairs. The purpose is to compile accurate and in-depth information about the health, structure, and operations of the business, which then allows the relevant stakeholders — investors, creditors, or buyers — to make informed decisions going forward.
Potential buyers, in particular, must always request such reports before committing to a purchase. That should help them assess all possible legal risks, the value of the equity and the assets, as well as any potential problems or liabilities.
Alternatively, the managers of a company may request a due diligence report themselves so as to have a better understanding of the business and its value before agreeing to a merger or sale.
What Do the Investigators Look Into?
A typical due diligence investigation will look into the company’s:
- Funding arrangements
- Constitutional documents
As part of our standard legal due diligence service, we at Savva & Associates examine the following:
- IP documents
- Share certificates
- Powers of Attorney
- Employee records
- Funding agreements
- Commercial contracts
- Registrar of Companies corporate certificates
- Any documents affecting the shareholding structure
- Constitutional Documents (Memorandum and Articles of Association)
- Any documents related to mergers, acquisitions, investments, and disposals
- Any documents associated with the company’s Directors, Secretary, and employees
A mandatory first step would be to also run a search against the company’s public files with the Registrar of Companies. This is done to establish whether the official records are consistent with the internal company records.
When the investigator closes the investigation, they will draft a due diligence report. This document details all the key findings from the investigation that might help the interested party make an informed decision about the prospective transaction. The report also lists all reviewed documents and provides an in-depth analysis of the most important issues. The investigator may also offer their own recommendations, comments, or solutions.
Are Big Changes in Store in Your Company?
Don’t commit to anything before commissioning an in-depth legal due diligence report.
To order yours, simply get in touch with us today.