Due diligence must be applied at all times in business for all parties concerned. It tells about the kind of business being done and the character of the businessmen involved. When it is not being held at high regard, there’s a good chance that the affair might not be legal. It also indicates if something or someone isn’t fair. Whenever a person, entrepreneur or not, follows due diligence, it is most likely that he or she is trustworthy and plays by the rules.
Who should practice due diligence
In this context, it simply means satisfying the legal process of buying and selling properties and/or businesses. Needless to state, brokers should be knowledgeable about what due diligence is. Aspiring owners are not spared from this. They should also exhibit transparency in the negotiation.
These are some of the pointers that any aspiring property owner should think about.
The broker might try his or her best in hiding or downplaying any negative business trend or industry trend. Potential buyers should be wary of this.
Buyers should expect competition, even if it’s undisclosed. The company is not required to divulge details on all potential buyers but nonetheless, it be of great help if they are aware of this fact.
- Credit problems with banks and other suppliers
The company is not following due diligence if they hide the information that they are drowning in debt at the time of the selling. They should make it clear to the buyer if they have problems with the bank, especially with regards to the property being talked about.
- Possible restrictions
Buyers should further investigate if there are restrictions regarding the planned selling of a business or a property. It is possible that a personal issue would restrict the seller from selling, or that he or she has a family member who’s against it. Brokers should exhibit due diligence by answering questions on all aspects of the deal, whether it’s personal or not.
- Pending litigation
A buyer has every right to know if there is any pending litigation against the company. No mention of this is means that the company does not demonstrate due diligence.
This is a difficult subject to tackle but it cannot be avoided. Most people are not familiar with the language of taxation; this is where an accountant or a CPA-lawyer comes in. These professionals can be trusted in following rules and consequently exhibiting due diligence.
- Policies and manuals
Buyers must review previous company policies and manuals, whether stale or currently applicable. This way, buyers have an over-all view of how the company works. Disputes can often be traced to which clause of company policy has been violated. The broker won’t spell out all policies so having a having a copy of all pertinent manuals is a way of ensuring due diligence.
One way of knowing if a company practices it is examining their reputation. If they have had any bad publicity in the past, then that means there’s a red flag somewhere.
- Labor union and employee-related issues
Lastly, buyers should not overlook labor union and employee-related issues. It should alarming if they don’t practice due diligence with own their people.