Legal documents for due diligence are documents that pertain to a company’s assets business operations, and any potential liabilities. This type of review is usually conducted before a merger or acquisition and is crucial in determining the value of the company. This review helps identify the potential risks by reviewing contracts, agreements and any restrictions or encumbrances placed on assets.
Lawyers will also scrutinize financial information, such as federal and State tax returns, bank accounts https://medicaldataroom.com/how-to-prepare-your-legal-documents-for-due-diligence/ and credit reports in addition to physical assets. They also will look into the company’s payroll and employment benefits, contracts and the organizational structure. Legal due diligence can take between 30 and 60 days. In more complex deals the time could be significantly longer.
Attorneys will also examine the regulatory aspects, including any issues with compliance and antitrust analysis(opens in a new tab). They may also examine the current legal environment of the company and any litigation that involves the target company or its officers.
The most important element of an investigation of due diligence in law is determining the potential liability for any transaction. It is common for lawyers to advise obtaining representations and warranties and liability insurance(opens in a new tab) to protect the purchase. This is crucial, particularly if the buyer is unfamiliar with the history of the company that they are buying from. It could protect the seller in the event of inaccurate representations or claims made by the buyer. In addition, lawyers could review any documentation of the company’s employee policies including severance packages and golden parachutes(opens in new tab) that could be affected by a change in ownership.