Due Diligence is the process of assessing material facts of the transaction and financial viability of the same. Due Diligence is advisable before starting the above assignments because information collected during this process is crucial for decision making and helps one understand risk involved in the proposed transaction.
Due Diligence basically is checking out the things before actually entering into any business transaction as it gives an idea of whether the proposed deal is favorable or not. Hence, DD is an investigation process of checking in depth the proposed business deal. The Nature and scope of Due Diligence depends upon the nature of business transaction.The concept of DD would be better understood by taking following examples:-
- Due Diligence by Investor
If you are going to invest into a Factory or any other entity, then due diligence would include checking the nature of the entity you are investing in, status of statutory compliances of that entity; profitability of the business, identifying the grey areas; review of compliances under labour laws, past pending litigation or violations and etc. It helps in reducing the risk of investment.
Before we explain the process we do for taking up DD for our clients, we want to give a small intro of who we are and what approach we follow to work.
Who are we?
We, Lawmax , strive to get the best result for our clients by taking a systematic approach during the Due Diligence exercise. Lawmax is situated in South Delhi, having branch offices in Gurgaon, Pune and Mumbai. We are one of the best Due Diligence Advisory Services in Delhi
Promoter of Lawmax is Mr. Kamall Ahuja, a renowned advocate having educational credentials as LLB from Delhi University, FCS from Institute of Company Secretaries of India and B.Com (H.) from Delhi University. Having a legal career in mind, he started as an Associate member of the Institute of Company Secretaries of India and performed wonderfully as a partner in Grover Ahuja & Associates, Practicing Company Secretaries firm based in New Delhi. Afterwards he joined the Bar council of Delhi and engrossed himself as an advocate. Mr. Ahuja is highly regarded for his versatile Corporate and Commercial trial skills for handling complex trade and competitive issues. He is expert in handling Due Diligence matters and possesses a great level of comfort while handling thorny issues. He carries an experience of over ten years in business advisory matters.
How we Work:
We follow a procedural approach for any assignment; we initiate any assignment by dividing the whole procedure in different steps to give better results to our clients. While deciding the steps we check whether the work is of Regular Nature or standardized work or complicated. Keeping in mind the nature of work we decide 4 basic questions:-
- Who-means Deciding the team who will take up the assignment
- When- we decide the start date as well as proposed end date to complete the assignment keeping in mind the client deadlines and complexity of work.
- What- we analyse all the activities/steps required to complete the assignment.
- How- this step helps the team to provide quality of work to clients and in order to facilitate that we provide tutorial videos prepared by experienced professionals.
Procedure for Conducting Due Diligence:-
- Determining the Areas of focus in Due Diligence:-
Under this step we determine areas of focus for Due Diligence. For Ex.:-
- Business Due diligence
- Legal DD for legal matters and material contracts
- Financial DD for financial matters
- Asset DD for lease or title deeds
- Environment Laws DD
- Intellectual Property DD for trademark and copyright applications
- Labour Laws DD
Areas of DD depends upon the nature of assignment.
- Allocation of Work to teams
For Ex. If any assignment of DD requires us to conduct Business Due Diligence as well as Financial DD, then the Business DD is undertaken by our Secretarial Team headed by a HOD along with the Team Manager, Team Leader and trainees and Financial DD is undertaken by our Finance Team.
Team will plan a schedule of events with the tentative dates of completion in a detailed sheet known as Project Management Sheet. According to this sheet we provide start and end dates to our clients.
- Initiating the Process of Due Diligence in concerned team with the help of Checklists
Checklists are basically prepared by us after considering past experiences of similar tasks and a lot of research. Also, they are in line with the compliances prescribed under the Act.
Firstly, the Team Leader of a particular team reviews all the documents, records and files of the Company for which the due diligence is proposed and accordingly finalise the checklists. Thereafter, the Checklists are cross checked by Team Manager
- Preparation of Due Diligence Report on the basis of findings
A detailed Due Diligence Report is prepared and on the basis of that report we suggest to our investor that whether such investment is fruitful or not. It is prepared keeping in mind the Objective of DD and covers all the relevant aspects that will be key to decision making.
- Our team of professionals who carry out due diligence services by following detailed checklists drawn with the help of live and practical cases of due diligence in the past.
- We analyse all the data provided by sellers and available in public domain and from that we chalk out clues about what may happened in the Company that needs to be investigated and on the basis of that we ask more questions.
- We are good at extracting important information by taking a deep dive into the proposed business.
- We will help you by giving solution to your following queries:-
- Is the company’s financial position correctly depicted in financial statements?
- Does the business have healthy cash flows?
- Does the company status active on MCA portal?
- Do the sellers have genuine ownership of shares?
- Are there any hidden liabilities?
- Is the business up to date in paying taxes and filing tax returns?
- If the company is having any asset, are they valued correctly?
- Is the title deeds related to ownership of assets genuine?
- Is the Company regular in completing applicable e filings?
- Are the Companies Act related documents updated?
- What are the material contracts entered by the Company?
- Whether the Environmental compliances are done properly or not?
- What is the status of disputes and litigations?
- What is the status of Business Licenses?
- Whether execution of agreements like loan agreements, lease agreements etc genuine?
- What is the status of IPR and its title?