Due diligence documents include those related to a company’s assets operations, liabilities and assets. This type of review is typically conducted before a merger, acquisition, or any other business transaction and is vital in determining the worth of the business. It also aids in understanding the risks that could arise from the event of a go to the website deal by looking over contracts, agreements and any limitations or encumbrances to assets.

Lawyers will also examine financial data, like federal and state tax returns, bank accounts and credit reports as well as physical assets. They will also look at the company’s payroll, employment benefits, contracts and the structure of the organization. Legal due diligence is a procedure that can take between 30 and 60 days. The timeframe could increase in more complicated transactions.

Attorneys also will look into regulatory issues, such as compliance concerns or antitrust analyses(opens in a new tab). They can also examine the legal landscape of the company, which includes any litigation that affects the target company or officers.

Examining the risk of a transaction is the most important aspect of a legal diligence investigation. Attorneys generally recommend purchasing representations and warranties insurance (opens in a new tab) to cover the purchase. This is particularly crucial when the buyer isn’t acquainted with the target company and its background. It is a way to protect the seller from misleading assertions or claims made by the buyer. Additionally, lawyers can examine any documentation of the company’s employee policies like severance plans and golden parachutes(opens in a new tab) which could be affected by a change in ownership.