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Due Diligence

In many cases, "due diligence" assures that the language in a contract fits the facts. (For public companies, due diligence also ensures that disclosure in SEC filings is complete and accurate.)

The devil is in the details, and this is where a lot of the time goes when the job is being done right.

Take a private financing: the investors want to know who already owns shares or holds options, and how many. The company's due diligence checks up on those numbers.

Due diligence is the nuts and bolts of a business lawyer's work. We at EntrepreLaw have done a great deal of legal due diligence in a large number of different financing and M&A deals.

Typical Context

In a Silicon Valley-style private financing round, the Stock Purchase Agreement will normally come with Disclosure Schedules attached. The disclosure on this Schedule must be crafted to fit the company's representations and warranties in the Agreement.

Making the Stock Purchase Agreement and its Schedules mesh is company-side due diligence in that financing context. Investor-side due diligence is also required for securities law purposes.

Due diligence protects the company and its investors from the great undesirable after a financing is completed: a surprise.