Due Diligence of Company

What is Due Diligence?

Due Diligence is the process wherein an investing party investigates, analyses and evaluates an intended major investment, transaction, take over, or business partnership before committing capital to it. It is a risk aversion strategy aimed at checking whether the information about the investment that is available is correct and complete.

In a business due diligence process, there are certain steps that are followed for proper performance. Initially, the terms of the business due diligence are decided between the buyer and seller parties along with signing in a non-disclosure agreement. The operational data and information about the business, like cost structures, customer base, etc. are measured, gathered and documented. Following operational due diligence are financial due diligence (like revenue expenses, profitability, assets and liabilities etc.) and legal due diligence (like tax payments, litigations, registrations, etc.). Finally, the results of the business due diligence process are shared to the buyers and the sellers.

Generally, the following documents and information regarding a business entity are required during company due diligence:

  • Memorandum of Association
  • Articles of Association
  • Certificate of Incorporation
  • Shareholding Pattern
  • Financial Statements
  • Income Tax Returns
  • Bank Statements
  • Tax Registration Certificates
  • Tax Payment Receipts
  • Statutory Registers
  • Property Documents
  • Utility Bills
  • Employee Records
  • Operational Records
  • Intellectual Property Registration or Application Documents
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