Legal due diligence in Nigeria involves thoroughly reviewing, investigating, and evaluating all legal risks associated with a target company before finalizing a business transaction, investment, or purchase of real estate. This due diligence process includes searching relevant locations, documents, and interviewing employees to uncover any liabilities related to the deal. Conducting comprehensive due diligence ensures all potential issues are discovered ahead of time, enabling fully informed decision-making regarding the costs and benefits of the proposed deal.

 

Corporate Legal Due Diligence

Corporate legal due diligence refers to the process of thoroughly investigating a company prior to partnerships, sales, mergers, or acquisitions. This involves assessing the company’s debts, liabilities, assets, tax returns and liabilities, and any pending or potential lawsuits. Legal due diligence may also include verifying the company’s legal status, directors, shareholders, and charges through a manual search with the Nigerian Corporate Affairs Commission (CAC). The main purpose of due diligence is to fully evaluate all possible financial and legal risks related to the company’s assets, corporate status, intellectual property, contracts, land deals, and employment practices. This ensures any investment or purchase is beneficial for the investor.

 

Advantages of Performing Due Diligence

Conducting legal due diligence on a Nigerian company is crucial for investors before engaging in mergers, acquisitions, takeovers, or other transactions with any company. The benefits of performing due diligence include:

– Assessing and minimizing risk and potential loss for investors, creditors, and shareholders.

– Monitoring the target company’s financial position, corporate status, leases, warranties, contracts, compensation, tax liabilities, long-term agreements, and debt obligations.

– Preventing investors from incurring liabilities and evaluating the prospect of solvency.

– Ensuring proper and complex corporate legal documentation during transaction implementation.

– Learning about the target company to enable effective communication and understanding.

– Fully understanding the target company’s business, structure, and liabilities to aid in negotiations.

– Enabling accurate legal opinions from both parties’ lawyers.

– Preventing corruption and illegal transactions.

Steps of Corporate Due Diligence

Legal due diligence involves but is not limited to the following steps: reviewing documents of a target company; carrying out interviews of individuals with knowledge of the company; conducting necessary searches at appropriate places; directly visiting and inspecting facilities; scrutinizing public records of the targeted entity; performing media and internet searches on the targeted entity; and evaluating any ongoing lawsuits against the company.

Legal due diligence is an essential process undertaken before corporate transactions with a third party in order to identify any potential legal issues that could arise from the deal. It involves a thorough investigation and analysis of areas like contracts, mergers, and acquisitions to fully understand the legal risks and implications. Due diligence is critical for corporate and commercial entities, as it enables the identification of obstacles, risks, and solutions prior to finalizing transactions.

Finally, it is important to understand that conventional due diligence involves 3 main levels that progress from a surface-level search to a deep investigation of the targeted entities. Level 1 may simply involve a basic records search regarding the targeted company. Level 2 scrutinizes the corporate entity more thoroughly by searching global and local media sources. Level 3 is the deepest investigation, directly scrutinizing public records and data, and may include site visits to relevant locations.

 

The information provided in this article aims solely to educate readers generally. it does not establish an attorney-client relationship with our law firm or constitute legal counsel. Please contact us directly for any specific legal assistance required.