In line with previous posts explaining the background to what we do (make legal due diligence better, faster and cheaper), this post will focus on some of the issues considered in legal due diligence.
As described in an earlier post, due diligence is the process of investigating and considering an action before consummating it. Legal due diligence refers to the legal portion of a due diligence investigation.
From a legal perspective, some key issues include:
- Governing Documents. Do the company’s governing documents (e.g., charter, bylaws, shareholders' agreement) allow the transaction? Who needs to approve the transaction for it to be a valid corporate action?
- Contracts. Who owns the company now? What does the company own? Does it own what it says it owns? Is anything triggered in the company’s existing contracts by the contemplated transaction?
- Liabilities. Is the company in compliance with laws it is subject to? Is the company subject to any significant potential liabilities? Might any significant potential liabilities arise because of the transaction? Might potential legal change in the area affect the company?