Fund Investments Due Diligence
Due diligence is one of the important and lengthy process. It’s a must needed thing for the buyer who wants to confirm the accuracy of what the seller claims in legal documented format.
What is Legal due diligence?
The term “due diligence” in the Merriam Webster’s Dictionary of law is defined as “The process of investigation carried on by a disinterested third party (such as law firm or an accounting firm) on behalf of a party contemplating a business transaction (as a corporate acquisition or merger, a loan of finances, or especially purchase of securities) for the purpose of providing information with which to evaluate the advantages and risk involved”
In simple words, Legal due diligence is an examination concerning a business by reviewing records and interviewing employees. A legal due diligence investigation is finished when a business or financial specialist is keen on purchasing a business or putting resources into that business.
The necessary of due diligence arises in case when the big companies or multinational corporations wants to trade any company or its assets. This scenario includes lot of people, documents and money. The due diligence’s report will provide you all the necessary details required. In addition, it helps the buyer to negotiate and make decisions.
Qwinlaw is one of the best law firms that provides services in legal due diligence in India. We are a one stop solution to all the necessary procedures required the from initial stage to the end report.
Legal due diligence in India
There is a deserved place for due diligence in Indian statutes. The conduct of due diligence has become a mandatory provisions under the securities and exchange board of India Regulations 1996 and offshore offerings of securities by Indian companies through American or global depository receipts (ADR’s and GDR’s)
The Indian context defines that ordinarily there is neither a positive statutory duty on the part of the buyer to exercise due diligence nor a criminal liability for a failure to exercise due diligence.
How is legal due diligence process undertaken?
The legal due diligence process is undertaken in four phases before the completion of the intended transaction
- Memorandum of understanding (MOU): These are set of preliminary negotiations usually culminated in the letter of intent or the memorandum of understanding.
- LDD: The legal due diligence investigation is done in this stage.
- Definite agreements: The negotiation and signing of the definitive or final transaction agreement is done in this method.
- Closing: The analysis and strategy is done between the transacting parties in closing stage.
In other words, a legal due diligence process is looking for data about the business to ensure that the speculation or buy is useful. The examination tries to uncover immeasurably imperative actualities and potential liabilities. Once the company’s due diligence report is gathered and broke down, an educated choice can be made.
What does a Legal due diligence report contain?
Initially a legal due diligence checklist has to be prepared. The checklist should mainly focus on parameters such as
- Financial Information
- Management Information
- Product and customer Information
- Legal and related information.
After the legal Investigation in above sectors, a final report has to be made. The legal due diligence report contains major factors such as:
- Company’s Information
- Statutory compliance with the applicable regulations
- Licenses, permits, approvals and specific statutory compliance
- Share holders
- Share capital
- Taxation issues and much more
Hence, due diligence is much more detailed one. It elaborates on all the aspects from a corporation to its labor problem, share markets to environmental issues to taxation.
Benefits of having a due diligence
- The information discovered during the due diligence investigation lead to support negotiation for both merger and acquisition.
- It forms a big picture of the target company and its future earnings.
- It give a complete analysis of the targeted company
- Smooth transition of the merger.
Risk Involved without due diligence
Investments in the equity of a private Company involve a high degree of risk. Investors may lose all or substantial amount of their investment if they are not careful and have not completed pre-investment due diligence.
How Qwinlaw can help?
We at Qwinlaw assist you with your Pre investment – Fund Investment legal due diligence. We are one of top Due Diligence Company in India. Also, we provide legal assistance for your Target Company for domestic or Foreign Direct Investment to India. In addition, drafting of the agreement is in-depth and entangled. This should be created by an experienced counselor. Therefore, Qwinlaw is the right choice for end to end solution on legal due diligence.