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Legal Documents For Due Diligence

Due diligence documents are crucial documents prospective buyers must examine to determine the validity of an acquisition. They include financial, legal intellectual property, general corporate information, tax data, human resources, and property and equipment. The results of the investigation are reported in a due diligence report.

An error that is common is to complete a sale without performing adequate legal due diligence. This is risky because it puts the buyer at risk to legal action in the case that he or she discovers later that there are legal skeletons hidden in the closet. It’s also irresponsible for the officers and directors of a corporation to do this because it is against their fiduciary obligations to the stock holders to act in good faith.

It is essential to establish an order of activities for the due diligence process. It should start with the steps which will take the longest time, leaving the typically faster items for last. It’s also recommended to conduct interviews with key employees as well as managers to get their first-hand experience.

In the end, the buyer must be able to agree to a list of required legal documents prior to negotiating with the seller. This is an ideal time to use the virtual dataroom as it will save both parties time and effort. If the seller doesn’t wish to reveal everything, he or she might ask the buyer to sign a confidentiality agreement prior to due diligence.

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