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Due Diligence and its importance
[/vc_column_text][us_separator][vc_column_text]When we create a new company, own or buy a business, our idea is that everything goes well from the beginning and that is how we try to manage it, but as we grow, sometimes certain requirements or compliances necessary for its development are left aside. It is of utmost importance to verify that all legal, accounting and financial aspects of a company are in due form and therefore it is important to audit its management, for this we have the aptly named Due Diligence, which is a legal term whose use is found in the business field and is translated into Spanish as Due Diligence or due diligence whose scope can be compared with the care that a good father of a family must give to the care of his children, reason why its non-compliance could lead to what we legally know as SLIGHT FAULT, whose definition we bring to mind to better clarify: "Slight fault, slight carelessness, slight carelessness, is the lack of that diligence and care that men ordinarily employ in their own businesses. Fault or carelessness, without further qualification, means slight fault or carelessness. This type of fault is opposed to ordinary or average diligence or care." So that if we neglect any aspect of our company we would incur in the aptly named Slight Fault. For this reason, it is important to conduct a study, a scan of how we are managing our companies, since we often delegate several and sometimes many functions to our subordinates, and according to the reports that each one provides us, it seems that everything in our company is running smoothly. That is why, in order to be certain that this is the case, it is advisable to conduct an audit (due diligence) at least once a year on the entire management of our company. This legal audit is also recommended when we are going to acquire a company that has been in the hands of another person, in order to determine that the purchase we are making has been managed properly, or if there is any pending issue, to be able to proceed with its immediate solution and thus avoid the non-compliance from becoming larger or more complicated. This investigation or audit must be prepared by external consultants, who must examine in detail the different areas of the company to determine if it complies with its obligations, that is, with "due diligence", and that there are no substantial legal risks derived from its activity; We would be wrong to entrust this task to individuals within the company we are going to analyze, since, as they are the ones who perform the functions day to day, they will state that everything is in order, whether it is done by them or by their colleagues, due to the fraternity that may exist between them. Due diligence is practically verifying the extreme care required by the company; for this, all the details involved in an audit or examination prior to making a decision must be studied, whether for our own company or for the purchase of another company that interests us for our business. We could also say that this Due Diligence has both corporate, accounting, and financial scope, allowing us to evaluate a business and determine the real risks the company faces and analyze the reality of its economic and legal situation. In order to give Due Diligence its due importance, it must be carried out by expert consultants, since they will know what to check to ensure that the company is of good quality and that there are no hidden defects. In order to have a complete overview of the company you wish to purchase, it is also important to conduct not only legal due diligence but also an accounting and financial audit; organizational and administrative issues; and if the purchase of the company also entails any real estate, these must be reviewed in their public records. At the same time, verify the safety and environmental compliance that are necessary for the well-being of employees and users, as well as for verification by the corresponding authorities. Without leaving out the issue of Human Resources, which is the essence of the proper functioning of any company; it will also be of utmost importance to verify the technology used to protect the information and its security; and the businesses that are pending execution and/or negotiation. To initiate due diligence, the owner and/or seller must provide the information, which should be presumed to be delivered as it has been handled, and this is where good faith (which governs all commercial businesses) comes into play. Upon receiving information from the owner and/or seller, the information provided must be kept confidential. When performing due diligence, it is of utmost importance to do so in the shortest possible time, which of course will depend on the amount of information to be analyzed. The shorter the time, the less likely the seller is to try to hide any issues that are not in proper order. It is important to understand that the objective of due diligence is clear: to identify the contingencies of the business to be acquired. At Lexincorp, we have expert attorneys in each area of law, who also have the necessary experience in conducting various due diligence processes. If you need more information on the subject or need to conduct a study of a company you own or one you are interested in acquiring, do not hesitate to contact us at namaya@lexincorp.com.
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[/vc_column_text][us_person image=”7718″ name=”Nora Amaya” role=”Socia” link=”url:http%3A%2F%2Flexincorp.com%2Fequipo_honduras%2Fnora-amaya%2F|title:Nora%20Amaya||” layout=”cards” img_size=”full”][/us_person][/vc_column][/vc_row]
