Legal Documents For Due Diligence

Legal documents for due diligence are important pieces of information that potential buyers must review to determine whether the purchase of a business is legal. These documents include financial, legal, intellectual property sales and general corporate information, tax data including human resources, equipment and property. The results of the investigation are published in an due diligence report.

It is a common error to try and complete an agreement without having done the proper legal due diligence. This is dangerous for all parties involved since it leaves the purchaser vulnerable to litigation if he or she later finds that there are legal skeletons in the closet. It’s also irresponsible for the officers and directors of a company to conduct this as it breaches their fiduciary duty to the stockholders to act in good faith.

It is important to establish an order of activities for the due diligence process. It should start with the processes that be the longest-running, and leave the tasks that are typically quicker for last. It’s also an excellent idea to conduct interviews with key employees as well as management to get first-hand information.

Additionally, the buyer must accept a list of requested legal documents in advance with the seller. It is beneficial to use a virtual data room for this purpose as it saves time and effort for both parties. If the seller doesn’t wish to reveal everything, he or she may require the prospective buyer to sign a confidentiality agreement before due diligence.