Legal Due Diligence

It is advisable to conduct legal due diligence when an investor is unfamiliar with the target company or wishes to uncover certain anomalies to attain the appropriate decision-making position.

WHAT IS THE PURPOSE OF LEGAL DUE DILIGENCE? The purpose of legal due diligence is to allow the investor to become acquainted with the intended beneficiary of the investment (commonly known as the target company) during the preparation of investments. However, it cannot uncover all legal risks.

During legal due diligence, our office identifies the significant legal risks of the investment. We examine the organization and operation of the target company, and inform our client about compromising legal facts and circumstances for the return on investment.

We typically advise our clients that the preparation of investments is generally a lengthy process, often taking several months. Therefore, it is worthwhile to initiate the legal due diligence of the target company in a timely manner. The process can be significantly expedited if the target company has a comprehensive record of resolutions, a contractual registry, and/or has summarized its real estate portfolio in a real estate cadastre.

During legal due diligence, our office examines every fact and data necessary for the investor's investment decision:

• The corporate legal structure and ownership circle of the target company.
• Type contracts related to certain positions.
• The real estate portfolio of the target company, with significance given to high-value or high-volume movable assets.
• Intellectual property, especially know-how, IP, or trademarks. The legal examination of these intellectual property rights is indispensable for the target company's future profit-generating capability.

What conclusions can be drawn at the end of the process?

At the end of the due diligence process, three types of findings usually emerge, depending on how much the identified legal risks jeopardize the investor's return on investment.

• The most severe risks are those that cannot be mitigated (e.g., through renegotiation of a contract) and significantly jeopardize the investor's return to the extent that the investment is highly likely to be excluded.
• In a milder category are legal risks that are advisable to address before the investment but do not, in themselves, constitute an excluding circumstance (a typical example is the conclusion of missing executive contracts).
• Finally, the third category includes suggestions that, while not essential, can significantly contribute to the legal and transparent operation (possibly future sale) of the target company. Examples include adopting Articles of Association or a board of directors' regulation.

If you would like to conduct legal due diligence or have any questions, we welcome your inquiry!