Due diligence in Australia covers numerous branches of law, but all in cases, the process refers to the steps lawyers and other professionals from the legal field have to develop in order to assess the legal situation of a company, asset or other good that one is interested in.
The procedure can be done because a party is interested in buying a property or a business, or it can be requested in the case in which a party wants to know as many details regarding their future assets. For instance, one can request due diligence for a large company, through which our lawyers in Australia and accountants will conduct specific procedures to see the current situation of the said company.
Regardless of the type of due diligence requested by the client, the purpose of the procedure is to provide as much detailed information to the client, which will help him or her to make an informed decision about a company, a property or any other type of asset. This procedure is generally necessary when an asset is available for sale, but due diligence can also be used in civil litigation for instance.
What is the due diligence in Australia during the purchase of a company?
Businessmen have the possibility of opening a company in Australia or buying a ready-made business. The latter is a company that has been incorporated and which does not have any business activities, and it is available to be purchased by investors who do not want to enter the formalities of company formation in Australia.
However, businessmen also have the possibility of purchasing a company that is available for sale and which has had commercial activities or still has at the moment when is listed for sale. In this particular case, prior to the purchase, the investors will generally request due diligence procedures, which are tailored according to the particularities of this case.
In this situation, our team of Australian lawyers will use all the methods available to assess the current situation of the company, to certify that the selling price is the realistic one or if the company has various complex situations that would create different unwanted financial difficulties for the new owner.
This is one of the most important matters and our law firm in Australia will make sure that, in the case in which the business has various serious issues, they will be revealed and presented to the investor interested in buying the business. Oftentimes, revealed issues will make the businessmen avoid a faulty investment or it can considerably influence the selling price of the company.
The selling price will be, however, evaluated through specific measures for due diligence in Australia, to make sure that the respective price is in line with the market price and with what the company offers in terms of assets and future financial projections. Our Australian law firm will also provide tax advice on any implications that the sale will have (from a financial and taxation perspective), so that our client can have a full image of what the sale procedure will actually mean, once the sale documents are signed.
Is due diligence in Australia applicable at an institutional level?
Yes, due diligence in Australia is a matter of interest not only at a business or individual level, but also at an institutional level. For instance, the Department of Foreign Affairs and Trade has created the Due Diligence Framework, through which the local institutions analyze whether a partner will be able to comply with the legal requirements applicable here. From an institutional point of view, due diligence refers to the following:
- it complies with the rules of the Public Governance, Performance and Accountability Act 2013;
- after due diligence in Australia is completed, the report done by the representatives of the institutions will remain valid for a period of 3 years;
- at an institutional level, due diligence is focused on 2 main parts – the organizational capacity and the risk management;
- both of these 2 parts analyze 7 different matters, such as the details of the entity, its past performance, results, financial aspects, integrity, fraud and others;
- when a person is verified based on due diligence matters at an institutional level, only 5 matters will be taken into consideration.
As said above, due diligence is also used as a way to evaluate a property that is being sold. Thus, individuals buying residential properties or commercial properties can request the services of our attorneys in Australia to be sure that the properties that they are interested in are sold without any hidden flaws. For more details on our due diligence services, we invite you to contact our Australian law firm.