What Is Legal Due Diligence
A comprehensive audit of a company's legal status before a transaction — merger, acquisition, VC investment, or asset purchase. Goal: identifying legal risks affecting price, structure, or the deal decision.
Key Areas of Review
Corporate — ownership, resolutions, articles. Contracts — key agreements, change-of-control clauses. Employment — contracts, disputes, non-competes. Real estate — titles, encumbrances. IP — registrations, licenses, source code rights. Regulatory — licenses, compliance. Litigation — pending disputes. GDPR — compliance status.
Red Flags
No formal resolutions, contracts without corporate approvals, unresolved copyrights to core software, tax arrears, change-of-control clauses with key clients.
How DD Affects the Transaction
Price (discounts for risks), representations and warranties, conditions precedent, indemnification clauses, and escrow.
Vendor Due Diligence
Seller commissions DD on itself — fixes issues in advance, accelerates the transaction, builds buyer confidence.
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