Legal Due Diligence
Counsel is not reading your documents. Counsel reads your clauses and prices what it finds.
4 Questions Behind Every Legal Review
Financial due diligence asks whether the numbers are real. Legal due diligence asks whether the rights behind them are yours, and whether they survive the sale.
Ownership.
Is the chain of title complete? Registrations, invention assignments, contractor agreements, the share register against the cap table.
Transferability.
Do the contracts follow the business? Change of control, anti-assignment, consent rights, landlord and lender approvals.
Continuity.
Does the right to operate survive? Licenses, permits, regulatory standing, merger control clearance.
Residual liability.
What follows the buyer home? Litigation, employment claims, tax exposure, environmental and data protection obligations.
Every finding lands in one of four places: the price, the indemnities, the closing conditions, or the disclosure letter.
Legal Due Diligence Document Checklist
Every request carries a scope limit, because an unlimited list produces volume, not answers.
Corporate
Five years of minutes
- ✓ Constitutional documents and amendments
- ✓ Statutory registers and share register
- ✓ Board minutes and shareholder resolutions
- ✓ Group structure chart
- ✓ Certificates of good standing
Equity
All outstanding instruments
- ✓ Cap table reconciled to the share register
- ✓ Option and ESOP grant records
- ✓ Warrants and convertibles
- ✓ Shareholder and investor rights agreements
Material contracts
Above the agreed value threshold
- ✓ Top customer and supplier agreements
- ✓ Distribution, agency and reseller terms
- ✓ Joint venture and partnership agreements
- ✓ Anything carrying exclusivity or most favored nation terms
Employment
Senior team plus everyone who touched the IP
- ✓ Key employee agreements
- ✓ Consultant and contractor arrangements
- ✓ Restrictive covenants and confidentiality undertakings
- ✓ Collective agreements and works council records
- ✓ Live and historic employment claims
Intellectual property
All registered, plus material unregistered
- ✓ Registration schedules with renewal dates
- ✓ Assignment chain from every creator
- ✓ Inbound and outbound licenses
- ✓ Open-source inventory for shipped code
- ✓ Infringement and cease correspondence
Litigation
Five years, above the value threshold
- ✓ Pending and threatened claims
- ✓ Pleadings, judgments and settlements
- ✓ Arbitration and mediation records
- ✓ Counsel confirmation letters
Licenses and permits
Three to five years
- ✓ Operating licenses with expiry dates
- ✓ Regulator correspondence and inspection reports
- ✓ Violation and enforcement history
- ✓ Written confirmation that authorizations survive a sale
Compliance
Current policies, three years of records
- ✓ Anti-bribery policies and training logs
- ✓ Agent and intermediary arrangements
- ✓ Sanctions and export control screening
- ✓ AML procedures and whistleblower reports
Data protection
Current position plus breach history
- ✓ Processing records and lawful basis analysis
- ✓ Data processing agreements with vendors
- ✓ Cross-border transfer mechanisms
- ✓ Breach log and regulator correspondence
Property
Every occupied site
- ✓ Title documents and encumbrance searches
- ✓ Leases, sub-leases and rent rolls
- ✓ Planning and zoning consents
- ✓ Landlord consent requirements on a sale
Financing
All outstanding facilities
- ✓ Facility and loan agreements
- ✓ Security documents and registered charges
- ✓ Guarantees and intercompany arrangements
- ✓ Covenant compliance certificates
Merger control
Every jurisdiction in scope
- ✓ Turnover and market share data for threshold testing
- ✓ Competition compliance history
- ✓ Foreign investment screening exposure
Audited statements and working capital schedules are not here. They belong to financial due diligence.
Twelve Groups. One Index.
Build the room around the request list, not around your own filing habits.
Change of Control and Consents
The clause that decides whether the revenue you are buying transfers actually.
Structure decides which clauses bite
This is settled before contract review starts, not after.
Asset purchase.
Contracts are assigned, so anti-assignment language operates directly. Consent is needed even where ownership never changes.
Share purchase.
The contracting entity survives. A bare anti-assignment clause often does nothing. Only wording that reaches a change in ownership applies.
The output is a consent matrix: contract, trigger wording, standard applied, revenue behind it, and whether the counterparty will actually sign.
Red Flags in Legal Review
Eight findings that move a price. Most are paperwork gaps, which is why sellers close them cheaply, and buyers charge for them.
Contractors who never signed assignments
The product belongs to whoever wrote it.
Share register against cap table
Issuances with no resolution behind them.
Licenses that die on a sale
Reapplication required, discovered after the closing date is set.
Litigation found by search
The claim matters less than the silence.
Change of control in the debt
Facilities accelerate. An assumption becomes a refinancing.
Contractors doing employee jobs
Back pay, benefits, and tax behind the IP problem.
Copyleft in shipped code
Licensing obligations nobody assessed.
Non-competes drafted too wide
Unenforceable in the jurisdictions that matter.
From Findings to Deal Protections
A finding is worth nothing until it is contractual. Five mechanisms do the work.
Disclosure runs the other way. Whatever the seller writes into the disclosure letter is carved out of the warranties, and insurers exclude known matters as standard.
What You Disclose, You Cannot Claim
Diligence answers become disclosure. The record needs to survive to signing.
Scope, Teams and Timelines
Contract volume and jurisdiction count drive the clock. Deal value barely moves it.
Red flag review
Only matters above the threshold. Two to four weeks in one jurisdiction. Faster and cheaper, but underwriters may price the gaps.
Full report
Every area written up, including the clean ones. Four to seven weeks. Usually required when placing warranty and indemnity insurance.
Cross-border
6 to 10 weeks and up. Local counsel per jurisdiction, each with its own severity conventions, all normalized by the lead firm.
External counsel leads buy-side. In-house legal and the company secretary carry sell-side preparation, because they hold the records.
Frequently Asked Questions
Counsel investigates whether a target owns its assets, whether its contracts transfer, and what obligations continue after a sale. It relies on documents rather than interviews and produces a full report or an issues list the buyer negotiates from.
Financial review tests accuracy. Legal review tests enforceability and transferability. They hand off contingent liabilities and debt covenants, where legal provides a number the financial team must model.
2 to 4 weeks for a red flag review in one jurisdiction. 4 to 7 for a full report. 6 to 10 or more across borders or on a carve-out. Seller preparation shortens all three, since most delays come from locating documents rather than reading them.
External counsel buy-side. In-house legal and the company secretary sell-side. Specialists cover intellectual property, employment, competition, and data protection, with the lead firm turning their separate findings into one severity scale.
They decide whether acquired revenue actually transfers. A termination right lets a customer leave at closing. Absolute-discretion consent hands that customer a renegotiation lever. Whether either applies depends on deal structure, which is fixed before contracts are reviewed.
Often, and it is the cheapest outcome for both sides. Assignments get signed, consents collected, registrations renewed. Where the fix will not be completed in time, it converts into a condition precedent, an indemnity, or a holdback.
In a competitive process, yes. Nearly every legal red flag is a paperwork gap, and closing a gap early never becomes a price adjustment. It takes 4 to 8 weeks to find old resolutions and chase unsigned assignments.
Usually, but privilege can depend on who receives it. Reports shared with lenders, insurers, or co-investors are released on agreed terms, and the closing record should show exactly who got what and when.
Legal Due Diligence Shouldn’t Move at the Speed of Your Worst Folder
Set the index to the request list, grant permissions, and let counsel spend week one reviewing instead of chasing.