Business Law Attorney

Due Diligence

The information below is for education and marketing purposes only. In no way it is intended to provide legal advice or create a client-attorney relationship. Should you have a question regarding the content or your situation, please contact a lawyer.

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What is Due Diligence?

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         Due Diligence is a process of investigation that a company or person undertakes when entering into an important contract with a third party, or making some other significant decision that relies on information outside of the control of the company itself. Due diligence usually involves a thorough investigation of the third party’s legal compliance and financial performance.

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         Due diligence may be necessary when a company plans to sell, purchase, or alter a stock offering. When a company intends to acquire a target business, it generally conducts its own due diligence on the target business, including their financial health, exposure to litigation risks, governance structure, reputational considerations, and more.

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What does Due Diligence Involve?

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         Although the process varies based on the goals and circumstances, it will generally involve collecting and reviewing the target business’s formation documents, financial records, material contracts, past and present litigation, risks of future litigation, employment matters, intellectual property rights, and other areas that may be relevant to the acquiring business’ interests.

The tasks of gathering, researching, and reviewing this information can be daunting depending on the size of the target business. Thus, due diligence is often done through the collaborations of financial advisors and law firms.  

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         When certain companies intend to sell their stock to the public, the Securities Act may require these companies to register their statements and to disclose certain information about the company. The issuer of the stock may be held strictly liable for any material misleading statement or omissions in its registration statement under the Securities Act. Therefore, in those cases, it is critical that companies undergo a thorough investigation. In short, the due diligence process is used to help inform the Buyer and sometimes the Seller of what they are getting into. Due diligence is meant to identify and reduce risks involved in a transaction, and a thorough review process can be an investment which saves the business from legal exposure to myriad risks.

 

         The tasks of gathering, researching, and reviewing this information can be daunting depending on the size of the target business. Thus, due diligence is often done through the collaborations of financial advisors and law firms.  When certain companies intend to sell their stock to the public, the Securities Act may require these companies to register their statements and to disclose certain information about the company. The issuer of the stock may be held strictly liable for any material misleading statement or omissions in its registration statement under the Securities Act. Therefore, in those cases, it is critical that companies undergo a thorough investigation. In short, the due diligence process is used to help inform the Buyer and sometimes the Seller of what they are getting into. Due diligence is meant to identify and reduce risks involved in a transaction, and a thorough review process can be an investment which saves the business from legal exposure to myriad risks.

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Highlight of Past Cases

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         Beijing Shenogen Pharma Group Ltd. manufactures and distributes medical products including diagnostic reagents, kinase inhibitors, receptor activity inhibitors, kinase allosteric inhibitors, functional antibodies, and other products used in tumor treatment.  On May 28, 2020, the Initial Public Offering regulatory body in China approved the request of Shenogen Pharma Group Ltd. to go public with the sale of 58,690,000 shares of stock.  As an international pharmaceutical company, the security exchange regulatory body in China requires Shenogen to furnish its due diligence as to its matters in the United States. Li Law Group assisted it with its due diligence in the U.S. and helped secure regulatory approval for the business to go public and raise crucial funds through its stock offering.

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         Red Key Real Estate was a property management company located in Omaha, Nebraska with excellent service and growing clientele. Due to its rapid growth, It decided to expand itself into the residential and commercial real estate market. Li Law Group assisted Red Key in transforming itself into a full-service real estate brokerage company with the approval from the Nebraska Real Estate Commission. The company now manages and sells commercial and residential property. 

 

Mergers, Acquisitions, and Restructuring

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         Li Law Group has assisted numerous other business entities in accomplishing major transformational steps in the growth of their businesses. In each of 2018, 2019 and 2020, Li Law Group oversaw client acquisition of corporate assets exceeding one million dollars in each year. Li Law Group has also managed the restructuring of corporate debt, executed mergers between existing corporations, registered securities for corporate fundraising, and assisted in countless other contracts, transactions, and corporate compliance and governance processes.

 

Disclaimer: the facts and legal circumstances of cases mentioned on this website are/may not be the same or similar to other cases or to your case, reader should not expect the same results could be obtained in each similar case. 

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You can contact Li Law Group, LLC at 8424 West Center Road Ste 108, Omaha, NE 68124. Or call 402-391-2486.