Due diligence is the process of scrutinising a company or asset before a transaction, rather than afterwards. Its purpose is not simply to ‘gather documents’, but to answer three questions: what exactly are you buying, what liabilities will be transferred as part of the deal, and how much should it cost, taking into account the risks identified.
Legal due diligence pays for itself even if the transaction falls through. Avoiding the purchase of a company with hidden debts running into several million, or an asset that does not belong to the seller, is precisely the outcome for which you are paying.
We carry out due diligence for business acquisitions, equity investments, mergers, asset purchases and pre-lending assessments.
+38 095 554-54-24 — legal advice
What we check
Corporate structure. Who are the actual owners (including the ultimate beneficial owner), have the shares been acquired lawfully, are there any corporate conflicts, and is the director authorised to sign the agreement? A contract signed by an unauthorised person is contestable.
Assets. Do they actually belong to the company? Are the rights registered? Are there any encumbrances: mortgages, pledges, tax liens, or seizures? It often transpires that the company’s key asset is leased or registered in the name of a related party.
Liabilities. Loans, sureties, guarantees, leases. Particular attention should be paid to sureties and guarantees provided on behalf of third parties: these are not always reflected on the balance sheet, but come into play precisely when you have already purchased the company.
Legal disputes. Current and potential: the register of court decisions, the register of debtors, enforcement proceedings. We check not only the company, but also its counterparties and founders.
Tax risks. Additional tax assessments, audits, contested tax assessment notices, high-risk taxpayer status, blocked tax invoices. Tax liabilities are transferred along with the company.
Bankruptcy. Proceedings against the company, its counterparties or owners. A transaction concluded on the eve of bankruptcy may be declared invalid — and the asset will be taken away from you.
Contracts. Termination clauses, change of control, penalties, exclusivity, long-term onerous obligations.
Employment relations. Unpaid wages, disputes, undeclared workers, obligations under a collective agreement.
Licences and permits. Whether they remain valid or are transferred upon a change of ownership — often it is the licence itself that represents the true value of the business, and it is not transferable.
Sanctions risks. Whether the company, its owners or counterparties appear on sanctions lists.
Two transaction structures — two different risks
Purchase of corporate rights (share deal). You buy the company in its entirety: assets, debts, legal proceedings, tax risks, including those you are unaware of. Cheaper and quicker, but risky.
Purchase of assets (asset deal). You purchase specific assets — and the company’s debts do not pass to you. It takes longer and is more expensive (taxes, re-registration), but is considerably safer.
Choosing the structure is the key decision in the transaction, and it is made based on the results of due diligence, not before it.
For more details: Purchasing a company’s assets.
What to do about identified risks
Identifying a risk is only half the battle. There are then four options:
- Withdraw from the transaction — if the risk is critical.
- Reduce the price — by the amount of the identified risk. The most common outcome: the due diligence report becomes a bargaining chip in negotiations, and it pays for itself many times over.
- Restructure the deal — purchase assets rather than corporate rights.
- Protect yourself with a contract — seller’s warranties, indemnity clauses, holding part of the price in escrow until the risk is clarified, and conditions precedent.
The last point is something not found in standard ‘template’ contracts. And it is precisely this that saves the day when a risk materialises.
When due diligence is not required
When purchasing a small asset with a straightforward history, where the seller is verified and the amount involved is insignificant, a basic check of the registers may suffice. We’ll put it that way.
Due Diligence is required when:
- you are buying a company or a stake in it;
- the transaction amount is significant for you;
- the seller has debts, legal proceedings or tax issues;
- the key asset is property, a licence or equipment;
- the transaction is cross-border;
- you are acquiring a stake as an investor;
- you are lending to the company against a pledge of its assets.
How we work
- We determine the scope of the due diligence — full due diligence or focused (assets only, tax only, legal proceedings only). This affects the timeframe and cost.
- We request documents from the seller — and note down anything they fail to provide. A refusal to provide a document is an indicator in itself.
- We check the registers — court registers, debtors’ registers, encumbrances, property rights, sanctions lists, and the Unified State Register.
- We prepare a report — not a ‘list of documents’, but a list of risks with an assessment of the consequences and recommendations.
- We structure the agreement — and build safeguards into the contract.
- We support the agreement until its completion.
Cost of services
| Service | Price |
|---|---|
| Consultation | from 1,500 UAH |
| Legal due diligence — risk report | from 5,000 UAH |
| Drafting or reviewing a contract for the sale of a business or assets | from 5,000 UAH |
| Support during negotiations and structuring of the transaction | from 5,000 UAH |
| Preparation of procedural documents | from 5,000 UAH |
| Litigation support | from 10,000 UAH |
| Comprehensive support for commercial cases | from 30,000 UAH |
The cost depends on the scope of the due diligence, the size of the company and the number of assets. We will quote an exact price once the scope has been agreed.
Full price list · Commercial disputes
Questions and answers (Legal Due Diligence)
Why is due diligence necessary if the seller has provided the documents?
Because you only see what they have shown you. A due diligence review uncovers what is missing from the documentation provided: guarantees for third parties, legal disputes, tax risks, encumbrances on assets, and insolvency proceedings.
How does buying a company differ from buying assets?
When you buy a company, you acquire it along with all its debts and risks. When you buy assets, you acquire only the property; the debts do not pass to you. The latter is more expensive, but considerably safer.
What should you do if the due diligence reveals risks?
Withdraw from the deal, reduce the price by the amount of the risk, restructure the deal, or protect yourself through the contract — via seller’s warranties, compensation for losses, or withholding part of the price.
Is due diligence worth the cost if the deal falls through?
Yes. Not buying a company with hidden debt is precisely the outcome you’re paying for. And in most cases, the report serves as a basis for negotiating a lower price and pays for itself many times over.
What do they most commonly find?
Guarantees for third parties not shown on the balance sheet; assets registered in the names of related parties; tax risks; legal disputes that the seller has ‘forgotten’ about; licences that are not transferable to the new owner.
Is it possible to audit a company without the seller’s consent?
To some extent — using public registers. But a full audit requires internal documents. The seller’s refusal to provide them is, in itself, an important warning sign.
How long does the audit take?
It depends on the scope: a targeted review takes weeks, whilst a full due diligence of a large company takes months. The timeframe is agreed in advance.
Do you check for sanctions risks?
Yes — we check the company, its owners, ultimate beneficial owners and key counterparties against sanctions lists.
What documents are needed to get started?
The company’s details or the asset’s cadastral number — this is sufficient to carry out a preliminary risk assessment using public registers.
Enquiry to a solicitor regarding due diligence at Svarog
Send us the details of the company you are acquiring — we will carry out a preliminary check against public registers and let you know if there is anything that would warrant structuring the deal differently. A risk identified in advance is always cheaper than one you end up having to deal with.
+38 095 554-54-24 · Kyiv, 7 Khoriva Street (Podil) · Mon–Fri 9.00–18.00