Running a business with a global outlook has far-reaching challenges for any company. Despite what the company is venturing into, an acquisition, a merger, spinning off, or carving out a business, its attorney must perform due diligence to identify potential legal accountabilities.
However, global due diligence has brought new twists of considerations for legal teams, attorneys, or law firms. Company attorneys transacting international businesses need to be aware of various jurisdictional requirements, policies, and regulations that need special attention when running a transaction.
This post will explore the three essential stages of international due diligence and the actions business legal teams must do for their customer’s global transactions.
Table of Contents
Stage one: preparation.
The first stage in any due diligence undertaking is preparation. At this phase, the company attorney needs to know what their customers aim to achieve with the transaction.
Based on the deal, the legal counsel must assess and understand what the end goals for the transaction are. Depending on the assessment results, attorneys identify important information to obtain and define priority for the next phase of the procedure considering the timelines and budget.
In the case of international transactions, the correct resources must be put in place to undertake due diligence within the required jurisdiction.
While this may be challenging for most legal counsel because of limited time and resources, leveraging an expert provider with technical know-how and international connections will ensure efficient and timely investigations.
Stage two: investigation.
The next and the most time-consuming phase in the global due diligence process is the investigation stage. This phase is also characterized by a lot of documentation and calls for optimum keenness from the attorneys.
The documents may vary depending on the information the attorneys need to obtain, assess, understand, and devise a legal opinion from. This makes each document search a special task, calling for a special time and attention.
Additionally, legal teams are required to be cognizant of various jurisdictional requirements. Variations in local informational need, document naming conventions, and laws and regulations call for local knowledge and unique considerations in this phase.
For instance, document vocabulary may not be similar to the U.S standards and can vary from one country to another. Also, local timeline variation and translation requirements may lead to prolonged turnaround times and extra complexities.
Check out the common documents searched when performing the international due diligence process.
- Business documents.
- Certificate of incorporation.
- Rules and regulations document.
- Stockholder agreement.
- Limited liability agreement.
- Directors list
- Certificate of good standing.
- Contract documents.
- Supply contracts.
- Customer’s contracts.
- Operating contracts.
- Litigation documents.
- Lien searches.
- Pending litigation.
Another critical document searched during the due diligence procedure is the financial records and information. This must show annual reports and financial statements.
Stage three: presentation.
This is the last phase of the due diligence investigation. It requires the attorneys to review all the collected documentation and assess its accuracy.
Most of the time, the company or business legal counsel may find that more information is needed to bring a clear picture of the results to their clients; hence supporting document searches may be required.
After obtaining all the relevant documents, the legal team will present their findings to the clients and propose recommendations showing whether the transaction is beneficial or not.
Based on the set preferences and the size of the investigation, the presentation of the findings and recommendations can be done verbally (a typical case in small dealings) or as a memorandum.
Conclusions.
Owing to the complexities involved when performing international due diligence for global corporate transactions, the timeline for the completion may vary depending on the size of the company, nature of the process, and jurisdictions involved.
The process can also be marred with unexpected intricacies that may affect the projected timelines and exhaust the legal resources for the process of which some may not be familiar with the local requirements for a given jurisdiction.
However, employing the expertise, technical know-how, and the connection of a globally trusted provider is essential in navigating the hurdles of the international due diligence process in each jurisdiction.