A legal due diligence review looks at all the legal documents a company possesses. It is normally performed when a buyer wants to buy a company. In an acquisition, the buyer needs to have certainty about the legal status of the company and any possible legal risks it is facing. Hence, legal due diligence can be described as a process where a detailed investigation and analysis is performed to assess the possible legal issues facing a target company.
A major focus in a company acquisition is the clear understanding of all of the obligations of the company: pending or potential legal issues, customer and client agreements and employment contracts.
In today’s fiercely competitive economy Mergers and Acquisitions, disinvestment’s, financing are order of the day. Even now good old principle of “caveat emptor” continues to hold paramount significance. This makes it incumbent on any party to exercise suitable precautions before undertaking any venture. Investigations hold paramount in such ventures investigating financial health of a company, its obligations, disclosures and non-disclosed facts and thus trying to minimizing its exposure to many problems and pitfalls that can arise during and after the acquisition.
The law casts a duty to find on every prudent man to make investigation before making investment in any form of property. Now in case of big companies and multinational corporations when one company buys or sell any company or its assets the whole canvass is very big and it is here that need for due diligence arises and now finally Due Diligence is finding deserved place in Indian Statues and hence it becomes extremely important in today’s competitive economy.
Business due diligence involves a review and understanding of the customer and supplier contacts, work in progress, status of receivables, employee relations, banking relations, etc. Typically the due diligence searches are performed by the buyer, but in certain circumstances the seller will also conduct searches on the buyer. Hence this is a topic which is relatable to all practice areas and holds importance for all professionals be it lawyers, company professionals, students, entrepreneurs, valuation adviser; chartered accountants (CPA)/merchant bankers.
The case pertaining to the biggest fraud in the history of mining would exemplify how due diligence saved the world from big frauds and stripping share-holders of their moneys. The case relates to the small Canadian exploration firm, which in matter of 4 years became a company having market capitalization higher than that of several major mining companies due to exploration in gold mineralization. Eventually, the Canadian Company formed a partnership with a U.S. company. Before making a firm commitment, the US Company insisted on carrying out due diligence and sank some exploratory drill holes to obtain independent data.
The results shook the mining industry; as the area in question did not contain any significant gold. Overnight the stock of the Canadian Company was rendered worthless. This whole affair was unearthed because the US Company insisted on carrying out due diligence before forming alliance with the Canadian Company.
This reflects importance of carrying out due diligence before investing in any form in any company anywhere. Carrying out Due diligence has become more significant in Indian context where everyday one or other Scam crops up.
The topics covered by Enhelion for this course cover the following:
- Module 1: Introduction to Due Diligence
- Module 2: Methods of Due Diligence
- Module 3: Process of Due Diligence
- Module 4: Efficacy of Due Diligence
- Module 5: Professional Due Diligence
This particular Enhelion online certification course is very useful as it will provide the participants a conceptual guide on various aspects of due diligence. In big World of Money where ironically “Knowledge is Power” this course on legal due diligence would ensure that there is no knowledge imbalance. It also ascertains information superiority, the risks in any transaction. One can negotiate with those that are open to bargain and to apportion those, which are not, and avoid the disappointment, displeasure and immense loss and abortive cost on the sudden “discovery” of undisclosed risks.
For more details on our Certification Course on Legal Due Diligence Contact Us or write to us on email@example.com