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Due diligence services

Due diligence is an investigation of a company that is usually used before concluding an agreement or starting new business co-operation. Due diligence involves a check of good standing of the company, evaluation of planned earnings and cash flows assessing quality of assets, identifying business risks, highlighting any unexpected issues that might affect execution of agreement, identifying hidden costs, commitments and contingencies, verifying and estimating potential tax exposures and other checks based on case-to-case basis. Due diligence helps to evaluate the fact whether you can trust your business partner through reliability check of new or current business partner in the result providing higher level of security.

Purpose of due diligence

The overall objective of due diligence procedure is to check the business partner and draw attention to possible problems or risks. Several types of due diligence exist and the checks depend on each transaction.

Property check

Before purchase of real estate - a property check should be done. It involves an intensive study of public registry, namely, if the property is registered correctly, if the owner actually has rights to sell the property or if the property is linked with any other properties. In addition, it implies identification of burden liabilities and any ongoing proceedings involving the property. If the property is rented out or registered any other rights for third persons, encumbrances and other registered restrictions, insolvency proceedings or tax debts, the property check must be done. Due diligence also covers revision of proposed purchase agreement and identification of risks that might affect the completion of the agreement, for example, if the property is rented out then the rent agreement must be taken into consideration.

Reliability check

In case of concluding business agreement between two companies, regarding prospective co-operation, the due diligence process would include such topics as: company records at the Company registry approving company name, legal address, officials and shareholders, Value Add Tax registry (VAT public registry), checking VAT tax payer status. Company’s financial stability can be checked at the Insolvency registry, to see if company has or ever had financial problems such as insolvency, temporary suspension of commercial activities, tax debts.

Mergers and acquisitions

In case of company acquisition, prior to concluding a share purchase agreement it would be important to assess the financial situation of target company, evaluating such factors as: earnings and cash flow quality, analysis of a quality of assets and liabilities. It is essential to evaluate a quantity and quality of personnel, identifyi the owned property and investigate if no pending issues or proceedings related to company property exist; checking public registries if no commercial pledges, encumbrances, and court proceedings are ongoing and might affect the company assets in future.

Certificate of good standing

Certificate of good standing is a public document issued by a competent state authority, approving that the company actually exists and at the moment of the check is in full legal compliance with all state requirements, including corporate and tax legislation, as well as filing annual reports and paying taxes. Above-mentioned certificate is issued if the company has paid all its statutory dues, has met all filing requirements and, therefore, is legally authorized to enter into transactions and run business on the territory of this jurisdiction.

Certificate of good standing, also sometimes called certificate of commonwealth, serves as a proof that all tax liabilities have been met in order to obtain financing, sell company’s business, renew licenses or enter into other business transactions. Such certificate generally might be requested by governmental institution, if you're applying for foreign qualification, private persons when considering granting a loan, banks for certain transactions, potential business partners as well as investors and partners. A good standing certificate is needed for expansion, financing and realization of business transactions.

Acquisition of the certificate of good standing

Certificate of good standing can be issued upon request. This procedure slightly differs in each jurisdiction: in European Union the certificate will be issued by Central register and it usually takes a few days. In other countries, such as the United States and offshore jurisdictions, where such certificates are issued by Company Secretary, it would take up to few weeks. In addition, it might be required to attach apostille, which will take few extra days to acquire.

Confidus Solutions

Confidus Solutions will help you to evaluate all possible options and choose the most efficient and unique solution to achieve your personal goals! We have many years of expertise in this industry and our experienced bookkeepers and lawyers will provide you with detailed consultation and legal assistance worldwide! If you require more information – check our offered solutions or contact us to get a unique offer!