As we introduced in our previous articles, this video will continue to discuss due diligence and legal audits. Specifically, we will lay out a checklist of information requests. The due diligence checklist is a useful tool for the process of acquiring or selling a company, and is also an analytical process that may be applied to any big decision.
It’s critical to remember that BEFORE signing any purchase agreement for a business of this magnitude, such as a company, compiled information is essential. As lawyers, we have the duty to support this with documents outlined in a «checklist.»
The benefits of this checklist in the context of a legal audit are that it can serve not only as a practical guide to the main points to review during the process of acquiring a company or selling assets, but also, from the buyer’s perspective, it can be very helpful in avoiding unpleasant or costly surprises. Furthermore, as sellers, it lends greater credibility to the transaction.
Therefore, an expert lawyer is expected to have the due diligence «checklist» document prepared, containing a list of information and documentation requests to enable an intensive review of the business and a successful transaction.
I highly recommend following the economist and lawyer Antonio Serrano Acitores, who details this process through his online lectures.
The checklist is a guide for all parties involved, whether you are considering investing or preparing to sell. Typically, the content of the checklist requires the following:
First, considering publicly available information. Why? Logically, it saves time and money not to do the job twice. Don’t request information that can be accessed through public records. Similarly, don’t request information such as annual accounts or articles of association, as these can be obtained from the Commercial Registry.
Second, we consider the strategic aspect. Request a shortened or comprehensive checklist that is tailored to the specific case. The key is to avoid wasting time gathering unnecessary information for the company. Depending on the type of company, it is necessary to customize a comprehensive questionnaire rather than relying on a universal model.
What are the usual areas or subjects of review?
The following topics are commonly identified through the review. Here is what to expect.
- Type of corporation
- Contracts
- Financing
- Intra-group
- Third-parties
- Guarantees
- Assets: moveable/ immovable property
- Ownership
- Leases
- Industrial Property
- Intellectual Property
- Tax
- Labor
- Administrative
- Environment
- Competition
- Regulatory
- Criminal Law: compliance
- And, many more!
* Note that the list is specifically tailored to the scope of the review. A due diligence review should be structured in three sections: financial, legal, and commercial (or business).
Topics are adapted to meet the needs of each specific case, such as those involving listed companies with «non-controlling» shareholdings. This remains a complex issue due to limited access to information and a lack of transparency. The same applies to controlling shareholdings in takeover bids.
Specifically, there may be a lack of up-to-date information regarding board members on their websites. Sometimes, missing information may be found through other channels; however, the missing information in and of itself may provide insight into the purchase landscape. Furthermore, it should be emphasized that mechanisms that may facilitate proper coordination between shareholders and listed companies may be lacking, hindering the ability, in particular, of small shareholders to have a stronger voice or to have their rights guaranteed.
A company’s activity is further distinguished as either a production activity involving goods or a professional services activity. In most regulated sectors, such as pharmaceuticals, energy, and telecommunications, companies are required to hold the relevant licenses to operate legally and in accordance with the legal framework.
And with this, we conclude the three-part series on legal due diligence in company acquisitions. Whether you are acquiring a company or refining your due diligence strategy, applying a strategic checklist for gathering information will help you avoid regret and support long-term, favorable results. Due diligence is not just about research and review; it is critical thinking for long-term success.
Ipso Facto Law 
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