INTRODUCTION
Legal Diligence
The process of legal due diligence entails an examination and assessment conducted by a prospective purchaser or investor to appraise the legal hazards and obligations linked to a company before engaging in a transaction.
The primary goal of legal due diligence is to pinpoint and assess any legal concerns or potential risks that could affect the transaction, the company's day-to-day activities, or its future outlook. Legal due diligence generally encompasses a thorough examination of diverse legal documents, including contracts, pacts, licenses, authorizations, and litigation records.
Legal diligence
To perform legal due diligence, the following will need to be scrutinized:
1. Contracts (customer, supply, operating and employee contracts and licenses)
2. Leases
3. Pending and potential lawsuits
4. Intellectual property
5. Property and tax liabilities
6. Environmental laws
7. Representations and warranties
8. Organizational documents (company by-laws, limited liability agreements, stockholder agreements)
Due diligence investigations take around 1-2 months. This is usually how long it takes for the buyer to complete a thorough evaluation of the business, including all the legal aspects.
However, the process can be extremely time-consuming and drag on if the seller goes into the deal unprepared. This is why always-on readiness is essential to a successful deal.
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