What is due diligence? How to do

In general, legal due diligence should include the following aspects: 1. Subject qualification of the target company: mainly investigate its establishment, registration, shareholders, payment of registered capital, annual review, company change, cancellation or cancellation, etc. 2. The contract and articles of association of the target company: pay attention to whether the contract and articles of association have the following clauses, contents or provisions to prevent acquisition; Whether there are any major transactions related to merger, acquisition or other transactions that may lead to the transfer of control rights of the company, which can only be implemented with the consent of the absolute majority of shareholders of the company; Whether there are restrictions prohibiting the replacement or rotation of directors, and whether the board of directors can be controlled after the merger; Whether there is a high-paying compensation scheme and equity of the dismissed senior managers, so as to correctly analyze the difficulty of the target company being merged and whether the merger cost will increase or to what extent. 3. Resolutions of the board of directors, shareholders' meeting and meeting minutes of the target company: In the case of merger, according to the provisions of the Company Law, there must be corresponding resolutions of the board of directors and shareholders' meeting, and this procedure is essential. Lawyers should pay attention to review whether the relevant resolutions of the board of directors and the shareholders' meeting are made according to law, whether they reach the number of votes prescribed by law or the articles of association, and whether the voting rights are valid, so as to ensure that there are no defects in the procedures. 4. Assets of the target company: The assets mentioned in this item refer to tangible assets such as land, real estate and equipment of the target company. 4. 1. The value of land and real estate depends on their rights. Focus on the investigation of the use of land and real estate, whether it can be transferred, the term of use or ownership, whether the rights are completely restricted, whether there are defects, whether there are events that may affect the rights, such as government expropriation and forced demolition, whether the consideration has been paid when obtaining the rights, whether the rights certificate has been obtained, whether it is rented or mortgaged, and what are the conditions for renting or mortgaging; 4.2. With regard to machinery and equipment, it is important to note its source and nature; Second, its transfer restrictions; The third is about the transfer procedure. 4.3. The significance of lawyer's audit is to find or straighten out the property right relationship of the target company in advance, find problems in advance and propose solutions to ensure that the property right relationship of the target company obtained by the acquirer is clear, the rights are complete and flawless, and there are no legal sequelae. 5. Intellectual property rights: In some target companies, intangible assets in the form of intellectual property rights may be more valuable than their tangible assets. The review of all intellectual property rights is to ensure that the acquirer can continue to benefit from it after the acquisition, and at the same time pay attention to whether there are related infringement lawsuits, so as to accurately assess the risks that may affect the rights. 6. Key contracts and contractual commitments: 6. 1. Most companies have several contracts that are crucial to their success. If this contract is allowed to be terminated when the control right of a company changes according to regulations, then the acquirer should carefully consider the acquisition arrangement. A similar situation will occur when enterprises rely too much on personal professional and technical knowledge or experience. 6.2. The acquirer should also determine whether the recent contractual commitments made by the target company are inconsistent with the acquirer's own business plan, such as providing capital to new production lines or new enterprises or joint ventures, selling key patents and copyrights, signing new long-term contracts with suppliers or customers, and promising new high remuneration or stock option arrangements to employees. 6.3. In addition, special attention should be paid to loans, mortgage contracts, guarantee contracts, agency contracts and franchise contracts. , to see if it is stipulated that when the control right of the target company changes, the payment obligation must be fulfilled in advance, or the right to use or related rights must be terminated. The purpose of reviewing such regulations is to weigh whether the merger will cause the acquirer to lose some expected benefits or rights after the merger is completed. 7. Employee placement of the target company: In this regard, the main issues are the level of benefits provided, the notice time required before termination of the contract and possible compensation. 8. Creditor's rights and debts of the target company: The debts of the target company can be divided into known debts and potential debts. Potential debts mainly include contingent liabilities, and tax and environmental protection responsibilities belong to contingent liabilities. 8. 1. For tax investigation, we should pay attention to the investigation of the tax paid, whether there is arrears, whether the tax country of the target company is adjustable, and make preferential provisions to avoid increasing the burden on the acquirer due to overdue taxes and fines. 8.2. Environmental protection investigation, including the relationship between the products and business premises of the target company and environmental protection, the relevant environmental protection laws and regulations of the target company, how the company passed the environmental protection review when it was established, whether the target company violated the environmental protection laws and regulations, the discharge of air and water, the storage and treatment of waste, whether it met the relevant licenses and permits, the pollution of the site and groundwater by toxic and dangerous substances, and whether the environmental protection department issued a notice of rectification and sanctions. In order to avoid fines, rectification within a time limit, production suspension and other responsibilities caused by environmental protection. 8.3. The liabilities of the target company will undoubtedly increase the liabilities of the acquirer. Even if there is a dispute at that time, contingent liabilities will definitely be prosecuted in the near future, which will also bring uncertainty to the liabilities of the acquirer. Although these responsibilities are unavoidable, they can be deducted from the money payable to the seller as a code or the seller provides corresponding guarantees to reduce the risk of the acquirer. 9. Major litigation or arbitration: Lawyers certainly need to know whether there are any litigation or arbitration procedures affecting the target company, including those that have happened, are about to happen or may happen. How many lawsuits or arbitrations are there? How big is the target? How's it going? What are the possible outcomes? In the case of huge claims, such as environmental pollution, product liability or employer liability, it is necessary to carefully consider whether the merger should continue. 10. Necessary approval documents: For mergers and acquisitions involving the transfer of state-owned shares, franchising and franchising, it is necessary to check in advance whether the target company has approved, and whether the approval is true, legal and effective. Without some approval, mergers and acquisitions are unsustainable. The above is reproduced, please adopt it.