Due Diligence

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 2,801 reviews

Jump to Section

Need help with a legal contract?

CREATE A FREE PROJECT POSTING
Post Project Now

What is Due Diligence?

Due diligence relates to an investigation or review of all the facts and details about a specific matter. The term applies more commonly within the business context where the buyer undertakes a complete and appropriate view of all facts about an asset before completing the purchase.

Within the financial context, due diligence may refer to examining all records about a specific deal before entering into a proposed transaction. This exercise of care has become an essential principle in governing modern-day interactions.

In most cases, the burden of due diligence is with the buyer. However, the two parties may agree to share the costs depending on the underlying arrangements. Even then, the seller also has a duty to ensure full disclosure.

What is Due Diligence in Law?

Due diligence is a legal obligation in some circumstances. For example, the events of the stock market crash 1929 necessitated the need to investigate material facts as a legal requirement in specific contexts. In addition, in 1933, the Securities Act came into operation, effectively making due diligence a legal obligation to enhance transparency.

The legal changes meant that security brokers and dealers are entirely liable for full disclosure of any information related to the instruments they may be selling. Today, the law requires that companies undergo complete audits before any securities are auctioned. The audit process seeks to assure buyers that the instruments are healthy.

The application of due diligence in law attempts to protect and minimize the risk of risky dealings. Full disclosure is a critical foundation of due diligence. In addition, the process allows both parties to identify red flags before entering any contractual agreements.

Meet some lawyers on our platform

Michael K.

58 projects on CC
View Profile

Orin K.

4 projects on CC
View Profile

Michael M.

11 projects on CC
View Profile

Brad H.

8 projects on CC
View Profile

Types of Due Diligence

Due diligence may take different types and forms. It all depends on the area of operation a party operates in at a given time. Here're some common types of due diligence.

By obtaining the necessary legal opinions and assistance from qualified lawyers, a company can maneuver the different types of due diligence that exist today.

Financial Due Diligence

Financial due diligence is among the most important due diligence in the current world. Before proceeding with any transaction, firms should understand the financial information, stability, and risks.

Financial due diligence seeks to investigate the accuracy of all the financial records presented in the confidentiality information memorandum or (CIM). For example, one may consider financial statements, company forecasts, and projections in a financial audit.

It's also important to consider inventory schedules when conducting financial due diligence. Financial due diligence is perhaps the most common form of care exercise today.

Legal Due Diligence

Legal due diligence is the other common form of due consideration today. Legal due diligence assesses whether a target firm has any underlying issues of legal subservience. It further attempts to understand whether the company may be embroiled in any legal issues.

The focus will be on the contracts and compliance doctrines during legal due diligence. However, the legal due diligence process may also focus on other important papers such as corporate documents and board meeting minutes. It's important to involve a lawyer during such an investigation to help you confirm facts.

Human Resources Due Diligence

Human resource due diligence is an essential process for any organization. This type of due diligence focuses on the most asset within the organization, which is the employee. Therefore, when undertaking human resources due diligence, the most important considerations include a company's organizational structure.

The other key focus, in this case, is the compensation and benefits inherent within the company's system. The investigation may also pay specific attention to existing union contracts between a company and other unions.

Due diligence at the human resource level also considers any existing harassment and wrongful terminations within a company. Such factors that may present legal consequences for a firm should be top of the agenda when conducting human resources due diligence.

Operational Due Diligence

When undertaking operational due diligence, the focus should be more on the company's operations. This process aims to identify all the existing issues pertaining to the company's operations. Such investigations may focus more on technology, assets, and existing facilities.

The goal of operational due diligence should be to unearth any hidden risks in the operations of a business. Further, operational due diligence focuses on unearthing potential liabilities in the business's operations.

Environmental Due Diligence

Every company interacts with the external environment in one way or another. As such, environmental due diligence seeks to ensure that these companies undertake the process of external due diligence within the confined set out environmental regulation procedures.

Some of the common areas of focus during environmental due diligence include the company's facilities, processes, and equipment. In addition, the goal is to understand whether the company might have infringed on any existing regulations governing environmental protection.

The primary purpose of conducting this review is to negate any risk of penalties in the present and the future. Companies that work environmental due diligence in advance can easily avoid the legal backlash of pollution.

Common areas of focus during environmental due diligence include the list of environmental permits and licenses. Every organization should have these permits and licenses to confirm their compliance. In addition, a close check of all the correspondences and notices from local and federal regulatory agencies is also necessary at this point.

Business Due Diligence

Business due diligence involves closely investigating all the business transactions and strategies adopted by a business and their impact on the bottom line. In addition, the examination may consider some important processes within the business, such as mergers, acquisitions, or privatization.

Buyers opt for either self-due diligence or reverse due diligence to capture all the material facts about the company beforehand. It's important to have a lawyer by your side during the process.

Acquisition lawyers, for instance, provide adequate information and legal support when dealing with matters such as asset purchase agreements.

Even when the issue is a pending acquisition with complex paperwork, you can still trust lawyers with the business purchase agreement.

Due Diligence Checklist

It's important to note that due diligence is a process with many moving parts. Therefore, it takes a greater focus on the due diligence checklist to determine the priority areas and the steps to help you get the best results.

The good thing is that today, the internet provides a wide range of checklists in the form of templates that parties can utilize to undertake comprehensive reviews effectively.

A checklist helps parties tick all the necessary moving parts during the review process. However, this also means consuming and analyzing loads of important information.

Here’s a due diligence checklist you can consider.

Examples of Due Diligence

There are varying examples that indicate due diligence. Here're some common and not-so-common examples.

  • A thorough investigation of a company to determine whether it's a sound investment before commencing a merger is a practical example of due diligence.
  • A consumer reviewing all the online reviews about a product before buying is another common example of due diligence.
  • When an underwriter audits an issuer's business and operations before selling it, this is also a practical example of due diligence.
  • In the case of human resources, an employer may undertake due diligence by initiating prior contact with the referees to ensure that they apt candidates.
  • Conducting a comprehensive review of the property before purchasing is also an excellent example of due diligence.

Here’re some examples of due diligence.

Get Help with Due Diligence

Due diligence is an important yet very tasking process. Whether you are undertaking business purchase agreement pricing or asset purchase, getting consulting agreement review is extremely important.

We have a team of seasoned lawyers who can handle your asset purchase agreements and draft your letter of intent. Contact us today for exceptional legal support.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

Antoine D. on ContractsCounsel
View Antoine
Member Since:
February 7, 2022

Antoine D.

Owner
Free Consultation
Get Free Proposal
Fort Lauderdale
6 Yrs Experience
Licensed in FL
Howard University School of Law

In his firm, Talented Tenth Law, Antoine focuses on helping people maximize their protection and prosperity in the courtroom and the boardroom. His firm’s services include representing people in lawsuits involving breach of contract, many types of civil lawsuits and helping business owners win government contracts among other things.

Tom L. on ContractsCounsel
View Tom
Member Since:
February 7, 2022

Tom L.

Managing Member
Free Consultation
Get Free Proposal
Houston
15 Yrs Experience
Licensed in TX
Louisiana State University Law Center

Tom is a former chief legal officer of public and private companies. He has extensive experience in mergers & acquisitions, commercial transactions, joint ventures, finance, securities laws and general corporate law across a broad range of industries, including construction, consumer products, e-commerce, energy and healthcare. As an attorney who practiced at two different Top 50 international law firms, he can deliver "Big Law" service at a competitive price. Prior to becoming a lawyer, Tom served as an officer in the U.S. Army and attained the rank of Captain. He served a tour in Iraq where he led a reconnaissance platoon and was awarded the Bronze Star Medal.

Craig Y. on ContractsCounsel
View Craig
Member Since:
February 8, 2022

Craig Y.

Partner
Free Consultation
Get Free Proposal
New York
26 Yrs Experience
Licensed in NY
New England Law - Boston

Craig E. Yaris is a partner at Parlatore Law Group, with the experience and drive to handle all your Franchise, General Business Practice, and Mediation needs. As a former small business owner and Chief Operating Officer of a franchisor himself, Mr. Yaris is passionate about promoting business growth. He has experience handling daily operations, employee disputes, and negotiations of pertinent contracts for a franchise company with 100 locations in five states, where he organized and conducted semi- annual meetings to educate and inform franchisees of best practices for improved growth. In addition, Mr. Yaris was responsible for the preparation and filing of the UFOC (Uniform Franchise Offering Circular) in several states and is well-versed in business formation. Between his time as Franchisor and Conflict Resolution Specialist, Mr. Yaris was the Co-Founder and Chief Operating Officer of an online company whose goal was to help inform marketers and business owners of the fast-paced and ongoing changes within their specific verticals. This experience helped him hone his research and writing skills and prepared him for the cloud-based aspects of Parlatore Law Group. Mr. Yaris also has extensive experience in public speaking, as he has planned and delivered several keynote addresses and educational seminars for many New York-based organizations, and as a Continuing Education Instructor for Hofstra University. Prior to joining Parlatore Law Group, Mr. Yaris worked as a Patient Advocate, and more recently, a Conflict Resolution Specialist, where he mediated and resolved disputes on behalf of patients with insurance companies. In this role, he negotiated for coverage of previously denied medications and medical procedures as well as successfully mediated disputes between individuals and business partners which would have otherwise resulted in protracted litigation. In addition, he has experience mediating employer and employee disputes as well as helping resolve family conflict. He has also studied and attended many Non-Violent Communication (NVC) workshops and strives to bring these tools and methods to all of his mediations. His variety of experiences speak to his ability to handle small business needs at all stages of business growth and development. Mr. Yaris also has experience with business growth and development, as he has worked with several small business on creating and implementing strategies for steady growth. In addition, to spending time with family, Mr. Yaris volunteers his time helping spread the message of the ACLU and he supports many local charities focused on families and children. He is admitted to practice in New York.

Amy P. on ContractsCounsel
View Amy
Member Since:
February 9, 2022

Amy P.

Principal Attorney
Free Consultation
Get Free Proposal
Edmonds, WA
18 Yrs Experience
Licensed in WA
The University of Montana School of Law

Amy has served as outside general counsel and litigator to established businesses throughout western Washington since 2010. Her passion and focus is providing the best possible representation for clients in the construction, transportation and hospitality industries.

Jacob O. on ContractsCounsel
View Jacob
Member Since:
February 14, 2022

Jacob O.

Contracts Manager
Free Consultation
Get Free Proposal
Iowa City
2 Yrs Experience
Licensed in MO
University of Iowa - Law

I am bar certified in the lovely state of Missouri. I received my J.D. from The University of Iowa College of Law (2019) and my B.A. in Political Science from BYU-Idaho (2015).

Nicholas V. on ContractsCounsel
View Nicholas
Member Since:
February 28, 2022

Nicholas V.

Attorney
Free Consultation
Get Free Proposal
Denver, CO
4 Yrs Experience
Licensed in CO, NY, TX
Texas A&M University School of Law

I am a solo practitioner with offices in Denver, Colorado and Austin, Texas with a focus on general business and real estate contracts.

Kelvin R. on ContractsCounsel
View Kelvin
Member Since:
February 25, 2022

Kelvin R.

Attorney
Free Consultation
Get Free Proposal
Dallas, TX
25 Yrs Experience
Licensed in TX
Tulane Law School

Experienced business and contract lawyer. Our firm specializes in commercial litigation and dispute resolution.

Jessee B. on ContractsCounsel
View Jessee
Member Since:
March 14, 2022

Jessee B.

Attorney | Creative at Law
Free Consultation
Get Free Proposal
Tennessee
9 Yrs Experience
Licensed in TN
The University of Memphis—Cecil C. Humphreys School of Law | Juris Doctor, Law)

Whether you're thinking of starting your own business and not sure how to bring your vision to life, or you're a business owner, creative professional, creator, influencer, artist, musician, startup, nonprofit, or entrepreneur who wants to grow your business and protect your content and brand—I can help. Get experienced legal counsel, quality representation, and creative solutions customized to fit your unique needs. Services include: entity formation, business issues, planning, financing, and strategy; contract drafting, review, and negotiation; intellectual property protection; copyright and trademark filing; startup and nonprofit setup and guidance; real estate matters; property purchase, sale, and leasing; assistance with legal issues related to content creation, branding, design, writing, film, music, art, entertainment, social media, e-commerce, marketing, advertising, data and privacy compliance, and more. Questions? Let's work together. Reach out and say hello.

Stephanie C. on ContractsCounsel
View Stephanie
Member Since:
March 8, 2022

Stephanie C.

Attorney
Free Consultation
Get Free Proposal
Niceville, FL
2 Yrs Experience
Licensed in AL
Southern University Law Center

Alabama Licensed Attorney offering Freelance Services for Wills, Trusts, Probate, Family Law Documents, Criminal Matters, and Real Estate Closings.

Benjamin V. on ContractsCounsel
View Benjamin
Member Since:
March 10, 2022

Benjamin V.

Attorney
Free Consultation
Get Free Proposal
Colorado
3 Yrs Experience
Licensed in CO
Columbus School of Law, Catholic University of America

My practice involves counseling businesses and individuals on a variety of contracts, such as business formation, technology/IP, real estate, leases, and even domestic relations agreements. Much of my practice is dedicated to litigation. As such, I approach contract and transactional work from a litigation perspective by advising clients of the risks involved in failing to develop proper contracts. It takes more than knowledge of the law to be a good lawyer. A good lawyer is honest and forthcoming with clients and has a counseling ethos. And, to me, a good lawyer stands in the shoes of the client when considering how to best serve that client. Whether my client is a business or an individual, I am passionate about helping my clients understand their rights, responsibilities, risks, and possibilities.

David H. on ContractsCounsel
View David
Member Since:
March 10, 2022

David H.

Technology Contract Attorney
Free Consultation
Get Free Proposal
Fort Wayne, Indiana
11 Yrs Experience
Licensed in MI
Western Michigan University - Thomas M Cooley Law School

Michigan licensed attorney. A compelling combination of technology, sourcing, sales, and legal experience. Over 20 years in technology positions negotiating technology engagements and contracts. General practice legal experience. Significant IT contracts experience (from IT sourcing/procurement) with the State of Michigan and Zimmer Biomet (Fortune 500). Excellent people, negotiation, and writing skills; keen eye for continuous improvement. Trusted business partner co-leading or supporting cross-functional integrated business/IT projects.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call