Legal documents for due diligence are important pieces of information that a prospective buyer should review to determine whether the purchase of a company is valid. This includes financial, legal, intellectual property, sales and general corporate information as well as tax data and human resources as well as property and equipment. A due diligence report will reveal the results of an investigation.
A common mistake is to complete a sale without doing the necessary legal due diligence. This is a risk for all parties involved as it makes the buyer vulnerable to legal action if she later finds that there are legal skeletons hidden in the closet. This is also a lapse of care on the officer and director who breach their fiduciary responsibilities to stockholders by acting in bad good faith.
It is essential to design an operating plan for the due diligence procedure. It should start with the processes that take the longest time, and leave the tasks that are typically quicker for last. Additionally, it’s an excellent idea to conduct interviews with key management and employees to collect direct information or to clarify things.
Finaly, the buyer and seller must agree on a list of legal documents needed in advance. This is an ideal moment to make use of the virtual dataroom as it will save both parties time and effort. In fact, if a seller does not want to disclose all the information, they can ask the prospective purchaser to sign a non-disclosure agreement prior to due diligence.