Due diligence is usually conducted by investors to check for regulatory and process compliance by the company on a regular basis. Due diligence of a company is usually completed before any private equity investment, business sale, bank loan funding, etc.
In this process, the legal, financial and the compliance features of the company are typically reviewed and documented. It is basically the process of scrutinizing all the substantial facts of a deal before a legal contract is signed by both the parties. It is not just restricted to buyers, even sellers can perform a due diligence on the buyer. Due diligence consists of accurate or factual, background, legal and accounting checks. This done to ensure that there are no hassles after a deal is done.
Most of the due diligence of a company begins with the Ministry of Corporate Affairs. On the website, the master data about a company is made publicly available. Additional, with payment of a fee, all documents of the relevant company is filed with the Registrar of Companies is made accessible to anyone. This information from the MCA website is usually verified first. The information and documents gathered in this step include
In accumulation to the above, the financial information of the company and other filings with the MCA pertaining to various aspects of the company can be downloaded and reviewed for due diligence
Some of the matters relevant to the business financial due diligence process are:
The following aspects relating to the taxation aspect of a company must be checked
The following aspects must be checked during the legal due diligence:
Following are the aspects that must be covered and documented in the operational aspects review: