Legal documents for due diligence include those related to the company's assets, business operations, and any potential liabilities. This type of review is typically conducted prior to any merger, acquisition or other business transaction and is crucial to determining the value of the business. It also helps to understand the potential risks associated with a deal by reviewing contracts, agreements and any restrictions or encumbrances on assets.

In addition to looking into the physical assets of a target business, lawyers frequently examine financial records such as state and federal tax returns along with bank statements and credit reports. They also will look into the company's payroll, employee benefits, contracts, and organizational structure. Legal due diligence can last between 30 to 60 days. The length of time may be extended in more complex transactions.

Attorneys will also examine regulatory issues, like any antitrust concerns or compliance concerns analyses(opens in a new tab). They might also analyze the legal environment of the company, including any litigation involving the company's officers or employees.

The most important element of an investigation of legal due diligence is determining the potential liability for any transaction. It is common for lawyers to suggest obtaining representations and warranties and liability insurance(opens in a new tab) to cover the purchase. This is important, especially in the event that the buyer isn't familiar with the history of the company that they are buying from. It can protect the seller in the event of false representations or claims made by the buyer. The last but not least lawyers can look over any documentation pertaining to the company's employee policies like golden parachutes, severance packages(opens in the new tab) that may be affected by changes in ownership.

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