Due diligence documents comprise those related to a company’s assets, operations and liabilities. This review is typically performed before a merger or acquisition and is essential in determining worth for the company. It also assists in understanding the risks that could arise from the event of a deal by looking over agreements, contracts and any limitations or encumbrances to assets.

In addition, to scrutinizing the physical assets of a potential company, lawyers typically examine financial records such as state and federal tax returns and bank statements as well as credit reports. They will www.medicaldataroom.com/top-8-vdr-features-every-ma-team-needs/ also review the company’s contracts, employee benefits, payroll and organizational structure. Legal due diligence is a process that can take between 30 and 60 days. For more complex transactions the time can increase dramatically.

Attorneys will also look at the regulatory aspects, including any compliance concerns and antitrust analysis(opens in a new tab). They may also review the legal structure of the company, which includes any litigation that involves the company or its officers.

The assessment of the potential liability of an investment is the most important aspect of the legal diligence investigation. It is typical for lawyers to advise obtaining representations and warranties insurance. insurance(opens in new tab) to protect the purchase. This is essential, particularly in the event that the buyer isn’t familiar with the background of the company in question. It can protect the seller from false claims or statements made by the buyer. The last but not least, lawyers can review any documentation pertaining to the policies of the company’s employees such as golden parachutes or severance packages(opens in the new tab) which could be affected by changes in ownership.