In financial and corporate transactions, decisions are made on the basis of documents. An error in a single clause can affect the outcome. Therefore, a review prior to signing is essential.
Legal due diligence is an analysis of the legal status of a company, its assets or contracts prior to entering into a transaction.
What is checked? (Due Diligence)
The aim of the review is to identify risks before the parties sign the documents. The analysis usually covers:
- the company’s constitutional documents;
- ownership structure;
- existing contracts;
- litigation;
- debt obligations;
- restrictions on assets.
Each element is checked separately but assessed as a whole.
When is due diligence required?
Due diligence is not only used in large transactions. It is most commonly carried out in the following situations:
- business acquisitions;
- investments;
- mergers or acquisitions;
- transfer of a share in a company;
- working with new counterparties.
The more complex the structure of the transaction, the more important the preliminary review.
Legal review of contracts
Particular attention is paid to contracts. It is these that define the obligations of the parties. The legal review of contracts includes:
- analysis of liability provisions;
- review of penalties;
- assessment of non-performance risks;
- compliance with legislation.
Even a standard contract can create financial risks.
Risk assessment
It is not enough to simply review documents. Understanding the financial structure is equally important. A financial services lawyer analyses:
- sources of assets;
- financial obligations;
- payment structure;
- potential tax implications;
- dependence on third parties.
This allows for the assessment of not only legal but also economic risk.
Financial lawyer for transaction support
When concluding transactions, it is important to support the process from start to finish. A financial lawyer provides:
- due diligence on the counterparty;
- analysis of documents;
- participation in negotiations;
- preparation of a legal position;
- monitoring of compliance with the terms of the agreement.
This approach reduces the risk of disputes after signing.
Legal support for financial transactions
An agreement does not end with its signing. It is important to monitor its performance. Legal support for financial transactions includes:
- monitoring the fulfilment of obligations;
- verification of payments;
- responding to breaches;
- preparation of claims;
- support in the event of disputes.
This allows problems to be identified in good time and losses to be minimised.
What risks does Due Diligence identify?
The review reveals problems that are not apparent at the initial stage. These include:
- hidden debts;
- legal disputes;
- restrictions on assets;
- invalid contracts;
- conflicts between owners.
Identifying such factors prior to the transaction alters its terms or halts the process.
Legal assistance from Svarog
Svarog conducts legal due diligence on businesses and financial transactions. We:
- analyse company documents;
- vetting counterparties;
- assessing contractual risks;
- supporting transactions;
- preparing legal opinions.
Our work is based on a systematic review of each stage of the transaction.
Questions and Answers
What is legal due diligence?
It is a comprehensive review of a company’s legal status or of a specific transaction prior to its conclusion.
When is legal due diligence required?
The service is required in various situations: when purchasing a business or making an investment; during company mergers or the conclusion of significant financial transactions.
What does a lawyer check during due diligence?
Company documents, contracts, legal disputes, assets and financial liabilities.
What risks can be identified during due diligence?
Debts, legal disputes, restrictions on assets and invalid contracts.
What documents are required for a company’s due diligence?
Constitutive documents, contracts, financial statements, asset data and court cases.
How much does a business due diligence check cost?
The cost depends on the scope of the review, the size of the company and the complexity of the transaction.