Legal Documents for Due Diligence

Due diligence documents include those related to a company’s assets operating, liabilities and assets. The review is usually conducted prior to a merger, acquisition or other type of business transaction and is essential in determining the worth of the business. It also helps to understand the risks that could arise from an acquisition by reviewing contracts, agreements, and any restrictions or encumbrances that apply to assets.

In addition to examining the physical assets of the 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 contracts, employee benefits and payroll as well as organizational structure. Legal due diligence is a process that can take between 30 and 60 days. In more complex deals the amount of time can increase dramatically.

Attorneys also will look into regulatory issues, like any compliance concerns or antitrust analyses(opens in a new tab). They might also analyze the legal landscape of the company and also any litigation involving the company’s officers.

The most important aspect www.medicaldataroom.com/how-to-prepare-your-legal-documents-for-due-diligence/ of an investigation into legal due diligence is assessing the potential liability for an transaction. It is typical for attorneys to recommend getting representations and warranties insurance. insurance(opens in new tab) to protect the purchase. This is especially crucial when the buyer isn’t familiar with the target company and its history. It will protect the seller from false claims or representations made by the buyer. Also, lawyers may look over any documentation pertaining to the company’s employee policies like severance plans and golden parachutes(opens in new tab) and could be affected by a change of ownership.