Legal Documents for Due Diligence
Due diligence documents comprise those concerning a company’s assets operations, liabilities and assets. This review is typically performed before a merger or acquisition and is vital in determining the value of the company. This review assists in identifying possible risks by examining contracts and agreements as well as any restrictions www.medicaldataroom.com/what-is-a-data-room-and-what-are-the-different-types/ or encumbrances placed on assets.
Lawyers will also examine financial data, including federal and state tax returns, bank accounts and credit reports as well as physical assets. They also will look at the company’s contracts, employment benefits such as payroll and organizational structure. Legal due diligence is a procedure which can take anywhere from 30 to 60 days. In more complex deals the duration can increase significantly.
Attorneys will also be looking at regulatory issues, like any antitrust or compliance issues, or analyses(opens in a new tab). They may also examine the current legal landscape of the company and also any litigation involving the company in question or its officers.
The most important element of an investigation into legal due diligence is determining the potential liability for a transaction. Attorneys often recommend that you purchase representations and warranties insurance (opens in the new tab) to cover the purchase. This is especially crucial when a buyer is not familiar with the company of interest and its history. It can protect the seller from false representations or claims made by the buyer. The last but not least, lawyers can review any documentation pertaining to the company’s policies for employees like golden parachutes and severance packages(opens in the new tab) which may be affected by changes in ownership.