Due Diligence (Legal Audit)
Main directions
examination of existing business; | |
examination of real estate; | |
examination of contractual practice; | |
examination of objects of intellectual property. |
Necessity of complex examination (Due Diligence) of an object arises in various situations, the most common of which are:
investing in the existing business in order to determine the investment attractiveness of the object; | |
conclusion of long-term contracts in order to examine trustworthiness of the partner/contractor; | |
acquisition of property in order to determine the risk related with the transaction. |
Due Diligence may include examination of the following:
Examination of foundation documents of the company and decisions of the authorities made on their basis, including analysis of corporate relations at the company: | |
– | compliance of foundation documents with requirements of legislation of Ukraine; |
– | compliance of the company’s structure and procedure of its formation with company’ Statute requirements; |
– | analysis of Shareholders meetings Minutes and their compliance with Statute provisions and legislation of Ukraine; |
– | analysis of documents related with privatization or corporatization of the company; |
– | analysis of documents, confirming ownership rights of the shareholders for property, deposited as payment for shares; |
– | analysis of offering memorandum and register of shareholders; |
– | analysis of internal corporate regulations. |
Examination of contractual practice of the company: | |
– | detection of risk of recognition agreements as void and null; |
– | legal assessment of usual contractual practice; |
– | detection of risk of non-execution of obligations by counterparties; |
– | detection of risk of claims/lawsuits raised by counterparties; |
– | analysis of settlement system and transfer of property in order to identify risk of causing damages and opportunities of arising corporate conflicts. |
Examination of documents establishing the rights of the company for conducting certain types of activity (licensees, certificates, accreditation, etc.): | |
– | compliance with procedure of license obtaining; |
– | compliance with license requirements during conduction of activities; |
– | detection of risk of license cancellation. |
Analysis of disputes, including court cases, in which the company is one of the participants: | |
– | legal analysis of court proceeding with identification of possible result of such proceeding; |
– | detection of risk of bringing the company to material (financial) responsibility and determination of its amount; |
– | identification of risk of property right for the company’s property. |
Examination of labor relations at the company: | |
– | legitimacy of labor agreement, its definite period of validity; |
– | compliance with hiring/firing procedures; |
– | compliance with procedure of change of labor terms; |
– | compliance with legislation on labor remuneration; |
– | compliance with legislation on labor protection; |
– | compliance with procedure of vacation granting; |
– | compliance with procedure of bringing to disciplinary and material responsibility; |
– | HR administration. |
Examination of title documents for immovable property, excluding land: | |
– | verification of fullness of documents package; |
– | analysis of available documents for their compliance with legislation, including: |
• | history of property right occurrence; |
• | history of property right transfer; |
• | history of object changes (major repairs, reconstruction, alteration, etc.); |
• | identification of historical and cultural status of the object; |
• | determination of shareholders and their shares; |
• | identification of risk of transactions challenging. |
– | administrative decisions of government authorities connected with the immovable property (putting into operation, permits, etc.); |
– | availability of documents containing additional obligations of the owner (privatization and investment obligations (preservation of the purpose usage of the object, preservation of the workforce, making monetary share contributions, etc.)); |
– | availability of contracts connected with usage of the property and rights of third parties (rent, joint activities, etc.); |
– | examination of availability of court procedures in respect to property owner and the property itself. |
Examination of title documents for land: | |
– | verification of fullness of documents package; |
– | analysis of available documents similar to the procedures for immovable property; |
– | verification of information about the land (land registry, purpose usage, easements and other encumbrances, restrictions concerning real estate and land (mortgage, seizure, tax lien)); |
– | examination of availability of court procedures in respect to land owner and the land itself. |
Examination of title documents for objects of intellectual property (OIP): | |
– | compliance with procedure of obtaining of title documents for OIP; |
– | compliance with license requirements during usage of OIP; |
– | aspects of license payments (royalty); |
– | detection of risk of OIP loss; |
Results and benefits
evaluation of investment attractiveness of the object; | |
prevention of recognition of certain transactions as void and null or as not concluded; | |
prevention of loss of rights owned by the owner or other rights holders; | |
prevention of application of fines and other administrative and economic sanctions to owners and other subjects. |
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