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Legal documents for due diligence are the documents that lawyers look over in order to determine relevant facts prior to the conclusion of a deal. They are a standard requirement for any company that is considering merging with another business or buying stakes in other businesses, real estate or intellectual property. Certain of these documents can be obtained quickly, while others, such as audited financial reports or tax records might take some time to compile. In addition, to these standard documents, there are an increasing number of laws that require businesses to report on various issues like human rights, modern slavery, and transparency of beneficial ownership.
A well-conducted legal due diligence program provides an organization with the opportunity to determine the potential risks and liabilities and to devise strategies to minimize the risk. Businesses can also use this opportunity to evaluate their own value, and ensure they are on the best foot in negotiations with potential buyers, partners or investors.
As the legal environment for M&A is constantly changing it is becoming more typical for companies to look for additional protection through a process known as representations and warranties liability insurance which will cover the costs in the event that the misrepresentations made were later proved untrue. A thorough legal due diligence can help reduce the risk of a liability issue following the closing of a deal. A thorough and well-documented checklist is an essential step towards achieving this.
