Due diligence basically involves the verification, investigation and audit of an entity or a potential deal or investment opportunity to verify and confirm all the relevant facts. It ensures that the organization undertaking due diligence knows all the details and gets confirmation about the genuineness of the other entity before proceeding with the same.
When it comes to compliance with laws, Secretarial and Legal due diligence ensures that the entity abides by all the laws and regulations. Let us obtain a deeper understanding of legal and secretarial due diligence and their scope.
Legal due diligence is usually performed during merger and acquisition transactions. It involves checking the legal affairs of the company. The acquiring company conducts an extensive examination of the legal affairs of the company in order to determine whether there is any legal risk involved in acquiring the company.
Legal complications can arise due to multiple reasons including operations, expansions, taxation etc. Thus, the following is the scope of legal due diligence:
The Companies Act, 2013 is the principal law governing and regulating companies in India. Further, when it comes to listed companies, funds and associations dealing in securities and funds involving public money, the Securities and Exchange Board of India (SEBI) acts as a watchdog. SEBI has put in place multiple laws and regulations and the concerned companies shall abide by the same. Secretarial due diligence helps in determining whether the company is complying with such laws or not.
Secretarial and Legal due diligence is one of the most important stages in any merger or acquisition transaction. The acquiring company needs to be sure that they are not inviting any unnecessary legal complications by acquiring or merging with the other company. Apart from legal due diligence and secretarial due diligence, companies also prefer conducting financial due diligence, commercial due diligence, IT due diligence, environmental due diligence etc. In case you need any assistance in relation to the due diligence exercise, feel free to contact the ASC Group.
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