Due diligence

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  1. Request for source documents
  2. Legal analysis of documents
  3. Writing a report on the results of document analysis.

When planning an investment transaction, an investor often needs to make sure that the prospective investment object has no history of violations of legislation. The object of investment here can be a legal entity (LLC, JSC, private unitary enterprise), and other objects of rights (real estate, intellectual property). Therefore, we cannot talk about audit law in the classical sense, when there is no volume of investment, for example, when carrying out a legal examination of a supply agreement itself. At the same time, due diligence is of interest not only to participants in investment transactions, often the initiators of this procedure are business owners who want to make sure that their brainchild is not in danger due to illegal actions of the hired management (other employees). 

First of all, the customer of due diligence should be interested in the absence of violations of those legislative norms that can cause negative legal consequences in the future. For example, an object of intellectual property can be created by a person whose legal relationship is not properly formalized, or the current owners of the enterprise (real estate) themselves acquired it with gross violations of the law, and the statute of limitations has not yet expired. Thus, the task of a lawyer conducting due diligence is not only to identify facts of violation of the law, but also to assess them from the point of view of law enforcement practice, which requires not only knowledge of law, but also the presence of significant experience in monitoring the work of law enforcement agencies. 

Due diligence is a complex procedure consisting of several stages (steps). Let's try to consider them. 

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Step 1. Request for source documents.

This stage is the most important because not everything here depends on the legal company conducting due diligence. The task of lawyers here is to provide an approximate list of documents that they need. The customer's task is to provide the maximum number of documents that will make the check the most voluminous. However, often the customer is a potential investor, and the seller, who is not interested in identifying violations, is engaged in the provision of documents. Therefore, often the work on legal audit includes not only checking the documents provided, but also visiting the location of the enterprise, interviewing its employees. 

Based on the results of the selection of documents, an acceptance certificate is drawn up. It is this act that will be important when evaluating the work of consultants conducting due diligence. After all, those documents that were not transferred and cannot be checked properly. Consequently, the law firm will not be held responsible for the fact that the documents not submitted contained information relevant to the report. 

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Step 2. Conducting legal analysis of documents. 

Due diligence involves the study of documents on certain sections of legislation that are important for a commercial organization. In the case of an express audit, compliance with legislation can be studied only in key areas of law - corporate, labor, contractual and some others. In the case of a full-fledged audit, the audit also affects compliance with environmental legislation, labor protection legislation and other sections of the legislation for which it is possible to bring the customer to responsibility. 

Also, a full audit involves the involvement of non-lawyers, including auditors certified by the Ministry of Finance. Since lawyers cannot independently assess the correctness of the organization's payment of taxes and fees, accounting. At the same time, certified auditors do not always have a deep knowledge of contract law, intellectual property law. They cannot assess the prospects for recognizing transactions as invalid, the prospects for resolving legal disputes on the recognition of rights to intellectual property.  

Express audit can be sufficient only when purchasing simple investment objects of low cost. In other cases, the use of express audit can only be justified by the tight deadlines for closing the deal, when the investor takes risks without getting the whole picture. After all, only a full-fledged due diligence can guarantee the absence of risks for an investor. 

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Step 3. Writing a report on the results of document analysis. 

The result of due diligence is a report prepared by the audit service provider. In the case of a full audit involving both lawyers and financial auditors, there can be two reports, one will concern legal audit, the second will affect the correctness of the calculation of taxes and fees, as well as accounting. 

The structure of the report on the results of legal audit is not regulated in terms of legislation. But many law firms have internal standards that they follow. Typically, the report consists of an introduction, sections on a specific branch of legislation, and a conclusion. Each section dedicated to one of the branches of legislation also contains its own introductions and conclusions. Conclusions are conclusions that often contain recommendations for eliminating the identified violations or stating the impossibility of correcting them. In the latter case, a description of responsibility for such a violation is necessarily given, and the possibility of its minimization is indicated, based on the current law enforcement practice. 


Legal audit has long been of interest to investors all over the world. But this opportunity is often neglected in Belarus. This approach leads to the fact that along with the business, problems are acquired that can affect the solvency of the enterprise and the investor even long years after its purchase. 

Especially in recent years, the interest of foreign investors in the acquisition of Belarusian IT companies has been growing. And here, special emphasis will be placed on the due diligence of intellectual property (IP due diligence). Therefore, we advise owners of IT companies planning such transactions in the near future to conduct IP due diligence now. After all, no one gives guarantees that a potential investor will give you time to correct the identified violations and will not take into account the identified risks in the cost of the transaction. 

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