Have Questions About This Template?
Book a 30-minute call with one of our experts. You’re in safe, experienced hands.
Due diligence enquiries
What is due diligence and when should you use it?
Due diligence is the process of investigation into the financial, tax and sometimes the commercial affairs of a business being sold.
It reduces the risk of the buyer prior to purchase as it helps establish any issues of possible concern.
Where the Buyer is already familiar with the Company, much of the due diligence may be by way of verification.
Where it is less familiar with the Company, a more thorough due diligence may be required.
These Legal Due Diligence Enquiries (Share or Asset Sale) can be used by the Buyer’s solicitor (or the Buyer) to investigate the company to be purchased and report back to the Buyer before a legally binding agreement is signed.
This is especially important because when a Buyer buys the shares of a company they will acquire all the liabilities of the company together with the assets.
By contrast, in a Business Sale, the Buyer can “cherry-pick” the assets and liabilities it wishes to acquire.
Furthermore, the principle of caveat emptor (buyer beware) applies to Share Sales.
A Seller is not under any legal obligation to disclose relevant information unless it is deemed to be a misrepresentation or a breach of a term in a contract.
For this reason, the Buyer will want to conduct a full investigation of the company to be purchased.
The due diligence process will also determine the warranties and indemnities that are included in the Share Sale Agreement.
But the warranties and indemnities should only be relied on as a last resort and not as a substitute for a full investigation.
Ideally, the due diligence should be completed before the share purchase agreement is issued.
What else might you need?
The due diligence is usually undertaken in parallel with the negotiation and conclusion of a share purchase agreement or business asset purchase agreement.
Matters arising in the due diligence will inform the content of the agreement and the negotiation terms.
You can find our suite of purchase agreement templates below.
Business asset purchase agreement
You might want to consider using a Heads of Terms Agreement where the buyer and the seller have agreed the principal terms of the sale, and you want to put them in writing to avoid any misunderstandings and identify any pitfalls before committing to a more formal agreement.
You can use one of our Heads of Terms templates to assist you.
Heads of Terms (Share Purchase)
We recommend that before you share any confidential information about your business you get a confidentiality agreement to protect it.
Use our confidentiality agreement to get the protection you need.
You may also need a disclosure letter.
This is a letter designed to protect the Seller from future claims by the Buyer under the warranties included in the Purchase Agreement.
It is also useful for the Buyer, alerting them to any “skeletons in the closet” that may not have been revealed during the due diligence process.
If you need a due diligence letter, simply choose from our templates below
Can’t find what you are looking for?
This service is your service.
If there is content you cannot find on our Hub simply email us your request and we’ll get you sorted.
If there is content you cannot find on our Hub simply email us your request and we’ll get you sorted.
