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Legal Due Diligence
presented by
Mr. Picharn Sukparangsee
Due Diligence may be divided into:
• Legal due diligence
• Financial due diligence
• Audit due diligence
• Technical due diligence
• Overlapping between financial due diligence ,
accounting due diligence , legal due diligence and
technical due diligence
Due Diligence
Due Diligence
Legal due diligence or LDD is part of all due diligence.
LDD for M&A and
JV transactions
Documents and information for LDD include
Competitor
5
Corporate matter
• Affidavit
• Memorandum of association
• Articles of association
• List of shareholders
• Minutes of the board of directors meeting
Documents and information for LDD include
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Corporate matter
• Minutes of the general meeting of shareholders
• Share register
• Share certificate book
• Financial statements and their notes
• Employee securities ownership plan
Documents and information for LDD include
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License
• Foreign business license
• Investment promotion certificate
• Factory license
• Building construction permit
• Building use permit
• Work permit
Documents and information for LDD include
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Agreement
• Memorandum of understanding
• Term sheet
• Head of agreement
• Shareholders agreement
• Joint venture agreement
• Sale agreement
• Advisory agreement
• Share sale and purchase agreement
• Asset sale and purchase agreement
• Lease agreement
• Service agreement
• Loan agreement
Documents and information for LDD include
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Agreement
• Syndicated loan agreement
• Security documents
• ISDA Master Agreement
• Underwriting agreement
• Franchise agreement
• Licensing agreement
• Know-how agreement
• Technical assistance agreement
• Debt restructuring agreement
Documents and information for LDD include
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Employment
• Management agreement
• Employment agreement
• Secondment agreement
• Work rules
• Social security fund
• Provident fund
• Worker compensation fund
• ESOP
Documents and information for LDD include
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IP
• Trade marks
• Copyright
• Patent
Documents and information for LDD include
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Insurance
• all risk insurance
• some risk insurance
• re-insurance
• fire , flooding, theft, riot, terrorism, force majeure
Documents and information for LDD include
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Land Documents
• Land title deed, land possession documents, condominium title deeds
• Building without a building construction permit
Documents and information for LDD include
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Environment
• Environmental impact assessment report (“EIA Report”)
• Approval for a project
Documents and information for LDD include
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Governing law
Arbitration
• Arbitration proceedings
• Recognition and enforcement of
an arbitration award
Litigation
• Court proceedings
• Enforcement of a judgment
• Pending or threatened legal disputes
Documents and information for LDD include
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Legal agreements and taxes
• Withholding tax
• Corporate income tax
• Value added tax
• Specific business tax
• Stamp duty
• Related parties agreements
• Transfer pricing issues
• E-commerce transactions
• Digital service tax
Documents and information for LDD include
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Other material documents and information
• Representations and warranties
• Letter of representations
• Management Discussion and Analysis
NAME OR LOGO
Board of Investment (“BOI”)
• Material matters
Frequently asked questions
Red flag issues
Shareholding structure
Share transfer restrictions
Right of first refusal
Tag along provisions
Drag along provisions
Call options and put options
NAME OR LOGO
Board of Investment (“BOI”)
• Material matters
Share buy back provisions
Transfer of shares and liabilities
Transfer of properties and tax liabilities
Change of directors
Change of the management
Conditions of a license
Initial mortgage, and subsequent mortgage
Pledge of shares
NAME OR LOGO
Board of Investment (“BOI”)
• Material matters
Registration of business collateral
Outright assignment and conditional assignment
Land documents illegally issued
Disclosure of information
Connected transactions
Acquisitions and disposition of assets
Reporting requirement
Tender offer requirement
NAME OR LOGO
Board of Investment (“BOI”)
• Material matters
Hidden liabilities
Reserve matters
Personal data protection provisions
Consent and revocation of consent
Change of purchase orders
Change of scope of services
Issues on services and know-how
Franchise rights on exclusive and non-exclusive basis
NAME OR LOGO
Board of Investment (“BOI”)
• Material matters
Actual event of default
Potential event of default
Material adverse change
A force majeure event
Enforcement of agreement
Termination of agreement
NAME OR LOGO
Board of Investment (“BOI”)
• Material matters
Claim for damages
Actual damages
Special damages
Liquidated damages
Punitive damages
Public interest
National interest
Issues
NAME OR LOGO
Issues
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○ Red-flag issues should be pointed out.
○ Solutions to red-flag issues should be provided.
NAME OR LOGO
Issues
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○ Should either all provisions of the documents or only important matters
of the documents be recorded in a legal due diligence report ?
○ Should any presumption of a true and correct copy of documents be
stated in a legal due diligence report ?
NAME OR LOGO
Issues
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○ Should a threshold amount of money of any agreement be set ?
○ Should financial statements for a certain number of years be clearly set
forth ?
○ Can proxy or grant of power be cancelled ?
NAME OR LOGO
Issues
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○ Is an agreement legal , valid and enforceable ?
○ Is it tenable that an agreement is unfair ?
○ Can an agreement be unilateral terminated ?
NAME OR LOGO
Issues
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○ How are actual damages and special damages determined ?
○ Are laws and regulations strictly complied with ?
○ Is any provision of any agreement breached ?
NAME OR LOGO
Issues
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○ Can a defaulting party opt for litigation if it is required to submit a
dispute under an agreement to arbitration ?
○ Will amendment to laws and regulations affect transactions ?
Case study
Chart on sale of assets Chart on LDD and matters
Chart on sale of assets Chart on Group of Companies
Picharn Sukparangsee
(66)2 -252-5895 / (66)81-7353160
www.bgloballaw.com
BANGKOK GLOBAL LAW OFFICES LIMITED540, Unit 1705, 17th Floor, Mercury Tower,Ploenchit Road, Lumpini , Pathumwan , Bangkok 10330 Thailand
Thank You