Drafting a Legal Due Diligence Report Consulting

Legal due diligence reports play an important role in assessing the legality and feasibility of transactions, projects, or business activities. This is a document that summarizes necessary legal information, helping businesses identify and manage risks and ensuring compliance with legal regulations. Preparing legal due diligence reports not only supports decision-making but also contributes to increasing transparency and trust in commercial relations. Viet An Law is a firm specializing in providing drafting a legal due diligence report consulting services for clients planning to invest in target companies in Vietnam.

How to understand legal due diligence?

Legal Due Diligence (LDD) is the process of collecting information, examining and evaluating comprehensively or partially the legal aspects of the target entity (business/asset), depending on the purpose of the assessment.

Legal due diligence is often a step in the process of implementing transactions such as loans, leasing/purchasing assets (such as land/factory), cooperation in long-term investment fields, and mergers and acquisitions (M&A). Legal due diligence is an important step and appears most commonly in M&A transactions in the world in general and in Vietnam in particular.

What types of legal due diligence are there?

• Legal Due Diligence of the Buyer: This is the most common form, in which the buyer is the client who requests legal due diligence of the target entity before making an investment decision.
• Vendor Due Diligence
• Compliance Due Diligence
• Legal assessment of each area, such as finance, operations, clients, taxes, etc.

What legal regulations are based on for legal assessment in Vietnam?

Legal due diligence targets two main objects: enterprises and assets. When the appraisal target is enterprises, typically in M&A transactions and capital flows, the legal documents commonly applied include:

• International treaties: WTO commitments, FTAs, AFAS, …
• Investment Law;
• Business Law;
• Competition Law (economic concentration);
• Contract section in the Labor Code, Civil Code, and Commercial Law;
• Related specialized laws: Real Estate Business Law, Education Law, Land Law, etc…

When is a legal due diligence report required in an M&A transaction?

It can be seen that in the general M&A transaction process, legal due diligence is carried out at the very first stage when the parties intend to negotiate a sale and transfer transaction. This is a consulting step to review legal issues related to the target object before the buyer makes a purchase decision, and it can also be a document for the seller to offer in the dossier sent to potential buyers.

Legal due diligence reports are often prepared in the form of legal advice letters, fully presenting the compliance and non-compliance issues of a business and/or legal risks for the review issues of the business/ asset that is the transfer target. Therefore, preparing these reports requires high expertise and a thorough understanding of the law on businesses and assets. Seeking legal assistance from lawyers is an indispensable condition for a successful M&A transaction.

What does a legal due diligence report show?

Depending on the scope of the client’s request, the content of the due diligence report will vary. Basically, some of the contents that are often required to be reviewed in an M&A transaction to acquire capital contributions / transfer a business will include:

• Corporate structure;
• Dependent units;
• Charter capital, actual capital ;
• Owner;
• Shareholder/member agreement;
• Business lines, business licenses (if any);
• Existing fixed assets: vehicles, real estate, intellectual property, …
• Projects owned/ implemented;
• Labor;
• Loans, guarantees,…
• Administrative obligations and legal disputes are pending.

Normally, legal reports are made based on specific templates to show the required content as much as possible. To ensure the accuracy and completeness of the report, businesses must do it through consultants who are knowledgeable about current laws in Vietnam.

Meaning of legal due diligence report

• Determine the feasibility of the transaction;
• Determine the purchase price when negotiating a Contract;
• Identify and manage risks before/after conducting transactions;

Legal due diligence reports are essential in ensuring compliance of business transactions and projects with legal regulations. Legal due diligence is an important step for parties to detect and assess potential risks, thereby helping businesses make better decisions.

Therefore, using legal due diligence report consulting services from specialized law firms not only brings legal accuracy and completeness but also helps businesses save time and resources. Experienced lawyers will provide insight into complex legal issues, thereby supporting businesses in building sustainable development strategies. Moreover, having a clear and detailed legal due diligence report also enhances the reputation and reliability of the business in the eyes of partners and investors.

Information clients need to provide when using legal due diligence report consulting services of Viet An Law

• Legal information of target business/asset;
• Current valid version of legal documents of the business/property;
• Ongoing transactions involving target assets;
• Loan documents, guarantees, mortgages (if any);
• Other relevant information is subject to confidentiality and accuracy assurance.

Please note that the accuracy of the legal due diligence report is entirely dependent on the information provided. Consulting units do not have the function of verifying the legality of documents or the accuracy of internal information provided. Therefore, providing information is an important first step in determining the quality of the legal due diligence report.

If you need advice on drafting a Legal Due Diligence Report, please contact Viet An Law for the most direct and accurate advice!