Blog Due Diligence
Due diligence procedure is one of the tasks of a comprehensive study of business: an audit in the course of due diligence helps to strengthen relationships for a large-scale transaction between counterparties. Also due diligence, as a rule, is applied in the case of the acquisition of a business or any large objects (for example, land or real estate).
Real estate due diligence is a procedure which provides a comprehensive property check and is carried out before it’s buying or renting. Under this procedure legal, financial, tax, construction and technical examinations can be carried out, potential risks are assessed and identified when concluding a specific transaction with a real estate object.
When two parties sign a contract, they both want to get some guarantees, but in practice, you can hardly exclude all risks, you can only minimize them, due diligence procedure was invented just for these purposes. It is performed to estimate all the possible problems with a counterparty or to minimize the risk of a contract being considered as invalid.
A complex verification procedure which is usually used in world practice, in order to find out the possible risks a business may face in future before entering into an agreement with a client, partner or contractor. The more detailed data about the transaction is provided, the more reliable decision can be made. The research includes the following.
The term “due diligence” includes the assessment of the company in various areas, including verification of the reliability of the firm, its financial documents and the conduct of inspections in the field of labour law. It is often used before entering into contracts, company acquisition or making investments.
Our company offers you a comprehensive Enhanced Due Diligence (EDD) service. This check is necessary to minimize the risks when you enter into a deal for large amounts of money. Similar checks are almost always carried out before entering into a deal with any counterparty, but EDD has a peculiarity: it provides a more detailed and thorough check of risky counterparties. Therefore, the first thing is to determine whether a potential partner can be classified as a risky one. And the KYC mechanism (know your customer) is used for this. This technique was developed and implemented by the FATF (Financial Action Task Force on Money Laundering). FATF is an intergovernmental organization that develops global standards in the field of combating money laundering and the financing of terrorism (AML/CFT), it also evaluates the compliance of national AML/CFT systems with these standards.
First, we should define the term itself. An audit is a procedure when a specialist scrutinizes company documents and tries to identify any hidden problems, debts, and other potential problems. Who needs that? When you buy a ready-made company, you have to understand all risks and correctly assess the situation; otherwise, you run the risk of facing huge problems. For evaluating the transaction, you need to provide a tax audit.
Due diligence and compliance are the procedures which are necessary for conducting any business activity. Both concepts are interrelated as they have a goal of avoiding as much as possible any legal and financial risks for the owner of organization or investor.