{"id":656,"date":"2018-01-09T17:09:14","date_gmt":"2018-01-09T17:09:14","guid":{"rendered":"https:\/\/rk-law.co.il\/english\/\/?p=656"},"modified":"2022-04-06T09:51:46","modified_gmt":"2022-04-06T09:51:46","slug":"due-diligence-important-tali-kessler-adv","status":"publish","type":"post","link":"https:\/\/rk-law.co.il\/english\/due-diligence-important-tali-kessler-adv\/","title":{"rendered":"Due Diligence \u2013 what is it and why is it important?"},"content":{"rendered":"

Recently we have engaged with an American public company, which desired to purchase technological business activity in Israel<\/strong>. Within the transaction, we performed due diligence<\/strong> regarding the Israeli company for them.<\/p>\n

During the examination, we revealed a quite broad scope of material information regarding the acquired business activity which was critical for the purchasing company.<\/p>\n

For instance, patents<\/strong> which expired<\/strong> since they were not renewed on time. In addition, it turned out that a substantial amount of<\/strong> unpaid debt<\/strong> is pending against the Israeli company (the seller) by virtue of court ruling given within claim submitted against it.\u00a0<\/p>\n

After all of the details became clear and obvious, our clients (the purchasing company) decided to execute the transaction despite the aforesaid, given appropriate reference to the information which was revealed within the assets purchase agreement.<\/p>\n

As part of the due diligence process, we addressed the clients to the accountant who cooperated with us for the purpose of completion of the due diligence in the financial, tax and accounting aspects.<\/p>\n

We supported the clients all along the process of the due diligence, negotiation on the assets purchase agreement\u2019s conditions, the completion, and execution of the purchase transaction and we still support them within their activity in Israel.<\/p>\n

The acquisition process of a company or a busssiness activity begins with due diligence<\/strong>.<\/p>\n

The due diligence includes encompassing and intensive inquiry, aimed to present, as much as possible, a complete picture of the company\u2019s history and past.<\/p>\n

On the one hand, due diligence is critical for the seller,<\/strong> in order to avoid false or inaccurate declarations but on the other hand, it obviously essential for<\/strong> the buyer,<\/strong> who invests his money and prefers as little as possible \u201csurprises\u201d along the way and following the transaction execution. \u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\n

When the purchaser purchases a company, it is being purchased including all its \u201chistory\u201d and obligations as well (including past debts, pending assessments against tax authorities, liabilities toward employees, third party claims for damages previously incurred to it, etc.).<\/p>\n

Due diligence is required either when purchasing the company itself, or when purchasing business activity<\/u>. <\/strong>The reason for that is that the creditors of the company from which the business activity is acquired might claim that assets were smuggled from them or sold below market value in order to avoid paying them.<\/p>\n

Due diligence includes inquiries of details regarding engagements with suppliers, clients, claims, allegations or demands, agreements between shareholders, liabilities toward third parties, the financial status of the company, bank credit, monetary obligations, real estate condition, liabilities toward employees and so forth.\u00a0\u00a0<\/p>\n

Due diligence includes<\/u>:<\/strong><\/p>\n