Corporate Due Diligence and Corporate Accountability

The object of corporate due diligence and accountability is the socially important characteristics of doing business in modern society, its economic, social, and environmental consequences.

Corporate Social Responsibility, Due Diligence, and Accountability

Corporate due diligence is the concept that organizations must consider the interests of society by holding themselves accountable for the impact of their activities on various stakeholders. This obligation goes beyond the statutory obligation to comply with the law and requires organizations to voluntarily take additional steps to improve the quality of life of workers and their families, as well as the local community and society as a whole.

Currently, the definition of corporate due diligence is considered in a broader sense: due diligence is understood as a comprehensive check of the state of an object or asset in order to identify certain risks that may arise during operations with this object or asset. As a rule, such verification is carried out by independent consultants.

Corporate due diligence as a risk management tool is responsible for:

  • actions on external influence;
  • development and compliance with standards;
  • responsibility to customers and society;
  • prevention of possible risks associated with the company’s activities.

Today, corporate social responsibility is an integral part of the business community, providing its members with a number of benefits, including the opportunity to enter the global market. Therefore, CSR management deserves special attention. This program really helps people today and creates opportunities for sustainable development tomorrow. Women from self-help groups speak with one voice about the importance of their new family business: “Now life is much better, especially for our children.”

Due Diligence in Mergers and Acquisitions

Any merger or acquisition transaction is carried out in several stages. One of these stages is Due Diligence. For the parties to the transaction, which are involved in M&A transactions for the first time, the phrase “Due Diligence” (DD) causes mistrust. However, the process of due diligence, as the term “Due Diligence” is sometimes translated in practice, is an integral part of any transaction in the M&A market.

Business valuation due diligence, i.e. due diligence procedure, provides potential buyers with the opportunity to assess the legal, financial, tax, and commercial position of the target company, business, or assets if an M&A procedure is planned. Due diligence in mergers and acquisition will typically cover the following information regarding (and the extent of the due diligence may depend on the buyer’s budgetary constraints as well as time constraints):

  • corporate information (such as ownership of shares, composition, and share capital structure of the entity);
  • regulatory approvals;
  • licenses or permits held by the target or its subsidiaries that prohibit or restrict changes in control of the target and its subsidiaries or that establish shareholding thresholds or limits on foreign ownership;
  • contracts with suppliers, customers, and employees (in particular if there are changes in the conditions of control or restrictions on transfer or assignment);
  • information relating to the entity’s assets (including intellectual property, real estate, and leases) and liabilities, including whether the entity has ownership of the assets.

Intellectual property due diligence is one of the areas of due diligence, which involves a special audit to assess the quantity and quality of intellectual property assets owned by or licensed to a company, business, or individual. Such a review should also include an assessment of how the company in question is protecting the IP.