Taras Miroshnychenko

Head of practice

E-mail

miroshnychenko@prikhodko.com.ua

Phone numbers

Head of Corporate Law and Fintech Practice. Expert in the creation and reorganization of companies, support of M&A transactions, as well as legal support for opening and running a business in the EU, Asia, and North America.

Legal audit of the company

Due diligence is an important tool for assessing the state of a company before investing, buying a business, or entering new markets.

It allows you to identify possible legal, financial, and tax risks that may affect the future operations of the company.

In this article, I, as the head of the corporate law practice of the law firm “Prikhodko and Partners”, will explain to you in detail all aspects of conducting a due diligence.

How to conduct a legal audit of a company?

Due diligence involves a comprehensive analysis of all legal aspects of a company’s activities, including:

Verification of constituent documents.
Analysis of the contractual framework and obligations.
Verification of tax documentation and reporting.
Assessment of compliance with regulatory requirements and licenses.
Identification of legal cases and claims.

According to statistics, about 60% of M&A deals do not take place precisely because of negative due diligence results.

What is needed for this?

For a high-quality legal audit of a company, the following documents and data are required:

Registration documents and articles of incorporation.
Contracts with partners, suppliers and customers.
Tax returns for the last 3-5 years.
Data on real estate and movable property.
Information about credit obligations and lawsuits.

Basic requirements for legal audit of an enterprise

For an audit to be effective, it must meet the following requirements:

Complexity: covering all legal aspects of the company’s activities.
Objectivity: independent analysis without bias.
Topicality: use of the latest regulations.
Detailing: an extended analysis of all possible risks and ways to minimize them.

Procedure and deadlines

Legal audit takes place in several stages:

Preparatory stage (5-7 days): collection of documents, analysis of the company’s field of activity.
Analysis and verification (10-30 days): risk assessment, analysis of agreements, verification of compliance with legislation.
Forming a conclusion (5-15 days): preparation of a detailed report and recommendations.
Discussion of results (2-5 days): consultation with the client, development of further actions.

The total duration of a legal audit depends on the complexity of the enterprise, but on average it is 20-40 business days.

How much does it cost to conduct a legal audit of a company?

The cost of services depends on:

The volume of documents for analysis.
Company size and industry.
Number of experts involved.

On average, a legal audit of a small business costs between 2,000 and 5,000 euros, while for large companies the cost can exceed 10,000 euros.

It will also be useful: Compliance check of counterparties in business

The main difficulties in conducting a legal audit of an enterprise

Among the main difficulties:

Incomplete or outdated documentation.
Inaccessibility of information due to trade secrets.
Resistance from the management of the company being audited.
Identifying hidden debts or legal risks.

According to international research, about 30% of companies face serious legal problems that affect purchase and sale transactions.

Is there an alternative?

If a full legal audit is not available or not feasible, the following alternatives can be used:

Review legal expertise: analysis of key aspects of a business without a detailed audit.
Thematic audit: checking specific areas, such as tax or contract law.
Automated audit: using specialized software to analyze contracts and financial documentation.

How do we help with a legal audit of an enterprise?

The company “Prikhodko and Partners” offers a full range of legal audit services:

Legal analysis of documents: verification of constituent, contractual and financial documents.
Tax audit: assessment of tax risks and optimization opportunities.
Analysis of legal proceedings: identifying open cases and potential risks.
Consultations and recommendations: developing a strategy to minimize legal threats.

Over the past 5 years, our company has successfully conducted over 200 legal audits, allowing our clients to avoid significant financial and legal problems.