Legal Documents for Due Diligence

Due diligence documents contain information relating to a company’s assets as well as its operations and liabilities. This type of review is usually conducted prior to a merger or acquisition and is crucial to determine the value of the business. It also assists in understanding the risks involved in the course of a deal by reviewing contracts, agreements, and any restrictions or encumbrances that apply to assets.

In addition to looking at the physical assets of a target company, lawyers typically examine financial records such as state and federal tax returns, bank statements and credit reports. They will also review the company’s payroll and employment benefits, contracts, and organizational structure. Legal due diligence is a procedure that can take between 30 and 60 days. The length of time could increase for more complex transactions.

Attorneys also will review the regulatory aspects, including any issues with compliance and antitrust analysis(opens in new tab). They can also look at the legal landscape of the company, which includes any litigation involving the company’s officers.

Assessing the potential liability of an investment is the most important element of a legal diligence investigation. Attorneys often suggest that you purchase representations and warranties insurance (opens in the new tab) to cover the purchase. This is particularly important when the buyer is not familiar with the history of the company that they are buying from. It will protect the seller from www.medicaldataroom.com/top-8-vdr-features-every-ma-team-needs/ false assertions or claims made by the buyer. 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.