A necessary stage of a transaction is the pre-investment audit, that is, due diligence. It is a detailed analysis and evaluation of all operating areas of the entity being the potential object of investment.
Due diligence is usually carried out before the acquisition of shares or stocks, whole businesses or organised parts thereof. It can be a step preceding decisions concerning mergers, divisions or transformations of business entities and underlying other capital investments.
Due diligence can also be the basis for the restructuring of individual entities or groups.
The fundamental scope of legal due diligence comprises:
- evaluation of internal corporate structure by auditing corporate documents (determination of ownership relations along with powers and responsibilities of corporate authorities),
- analysis of relations with associates,
- analysis of the status of real property and main movables
- encumbrances on the corporate assets,
- evaluation of key agreements and contracts, in particular with suppliers and customers, and analysis of credit and insurance agreements,
- identification of human resources (number of workers and structure of employment, remuneration),
- determination of the current legal status of intangible assets (patents, trademarks, industrial designs),
- analysis of pending litigation, in particular disputes related to labour law, civil law, administration and law, criminal law and arbitration,
- evaluation of documents related to legal compliance of business activity in terms of administrative aspects (permits, licences, approvals),
- legal analysis of all significant aspects of a particular transaction.
GESSEL’s due diligence practice is led by Aldona Pietrzak, partner.