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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