Legal documents for due diligence are documents related to a company’s assets, business operations and liabilities. The review is usually performed prior to any merger or acquisition and is crucial in determining the value of the business. It also aids in understanding the risks that could arise from the event of a deal by looking over agreements, contracts and limitations or encumbrances to assets.
Lawyers will also examine financial information, such as federal and State tax returns, bank accounts and credit reports as well as physical assets. They will also look at the company’s payroll, benefits, contracts, and the organizational structure. Legal due diligence may take between 30 to 60 days. The duration of the process can increase for more complicated transactions.
Attorneys also will review regulatory issues, including compliance concerns as well as antitrust www.medicaldataroom.com/top-8-vdr-features-every-ma-team-needs/ analysis(opens in new tab). They will also review the current legal environment of the company and any litigation that involves the company’s officers.
The most important aspect of an investigation into legal due diligence is determining the risk for the transaction. Attorneys typically suggest that you purchase representations and warranties insurance (opens in a new tab) for the purchase. This is important, especially in the event that the buyer isn’t familiar with the history of the company that they are buying from. It can protect the seller from misleading claims or representations made by the buyer. Additionally, lawyers can review any documentation regarding the company’s employee policies including severance packages and golden parachutes(opens in new tab) that could be affected by a change in ownership.