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Legal briefing notes

Legal briefing notes

Legal audit (DUE DILIGENCE). Accompaniment of purchase of the business

Legal Accompaniment of purchase and sale business contracts

Laws of the Russian Federation allow using different options of purchasing of the whole business or its assets. If an entrepreneur would like to purchase a business or to make investments, he should get information about the object of purchase, because it is an investment of capital that should be profitable.

Due diligence of a business is the most important tool, which can be used by investors. The final goal of due diligence is to determine the actual data, that relate to the assets and is to find out what obligations and encumbrances exist.

Due to this, it becomes possible to organize the risks of a project. The legal audit will be necessary to choose the optimal legal route of purchasing when the expenditures of money and of time are minimal and net transactions.

Due diligence of a business provides insight into whether it is advantageous for purchasing a particular business, how ownable it is from a financial point of view and what option of purchasing to choose.

What objectives can be solved through evaluation of business assets The audit makes it possible to determine the risks in such cases:

  • If there is a danger of losing control of the business during the disputes between founders or shareholders;
  • in challenging of agreements;
  • when there is loss of control over real estate;
  • in case of loss of suppliers or clients;
  • if there are existing lawsuits against the enterprise
  • if the permits are lost;
  • in case of bankruptcy;
  • In labor disputes.

It is not available as far as possible for the customers to identify the shortcomings of the acquired business with absolute certainty and some specific problem situations can appear after the purchase. That is the reason why the skills and knowledge of qualified specialists are needed.

A legal audit during accompaniment of purchase and sale business contracts

Our company provides integrated services of lawyers in doing so such conditions shall be verified:

  • The object of the purchase and counterparty

Documents of entitlement and questions related to charter capital, the authority of governing bodies, risks of reclamation by shareholders will be analyzed.

  • Income-producing property and funding sources

Data verification of property, limitations of the owner’s rights, legal relations according to which company should fulfill certain requirements of partners.

  • Tax risks

They depend on entirety of tax records and how properly taxes are paid. And all issues of taxation are analyzed.

  • Litigation risks

Unfulfilled judicial decisions, demands and claims of third parties will be checked.

  • Other threats

Such questions will be checked like: if there are unrecorded employees, treaties defining the financial responsibility of staff, legality of resignations of staff members, the possibility of administrative liability, the prospective maximum penalties. Outcomes will be documented as written opinion and recommendations.

What documents are required to make an audit

Our experts analyze:

  • certificate of OGRN, Individual Taxpayer Number, all corporate and constitutional documentation;
  • documentation representing the decisions of shareholder meeting;
  • company-issued acts;
  • documents of the company's divisions;
  • issued authorities in the register;
  • all granted permits by government authorities
  • cost calculation of net assets;
  • list of movable property and real estate;
  • all treaties that confirm the acquisition of property rights for real estate and also are related to the business activity of the enterprise;
  • accounting records;
  • collective labor agreement, and all documents that are related to labor activity of employees;
  • documents which include the rights on the results of intellectual activity, copies of documents that confirm the ownership rights of products, processes, technologies and trademarks;
  • documents that confirm the rights of the company for real estate, extracts from the register, cadastral plans and also documents that confirm that the company has fulfilled its obligations under deals;
  • documents that confirm encumbrances of movable property and real estate, liens and judicial restraints;
  • information on administrative sanctions, examinations of civil services and municipal authorities, that were conducted or are planned to conduct;
  • list of all legal proceedings, where the concerned inspected individual was participated in;
  • decisions of the courts, enforcement orders that are related to the company;
  • Other documents that can be important and that depends on the objectives of LDD.

Arrange for services of due diligence in the Tsentralny Okrug Law Firm

Our company provides the services of legal audit; analyze the entities that are located not only in Moscow or in Voronezh, but other cities in the Russian Federation. Our experts provide legal assistance at a high level. We give consultations for entrepreneurs if they are interested in mergers and acquisitions or the purchase of a business. Do you have a difficult question? We are ready to give a solution.

Author is Zoya Philosop

Do you have a difficult question? let's discuss it when we meet!