Legal due diligence: Is it high, medium or low risk?

Due Diligence

The most difficult part of legal due diligence when I started out as a corporate lawyer was not the voluminous review of documents and preparation of reports.

The most difficult part was to rate the risks relating to the issues identified during the legal due diligence exercise.

Some clients or instructing counsels prefer to have a summary of legal issues with a rating on the significance of each issue in legal due diligence reports.

Having the high, medium and low risk rating or traffic light system (red, orange and green) doesn’t help if there is no description of the significance of the risk for each category. Some instructing counsels may provide their own rating of risk and description.

If you need to come up with your own, an example of the description may look like this:

• Material issues which affect the ability to complete the transaction/ deal breaker
• Issues to be addressed in transaction documents
• Issues to take note of/to be addressed post-completion of the transaction
• Issues requiring further evaluation/information

There is no fixed rule on the description. What matters is to have a clear description so that the parties preparing and the parties reading the reports have the same understanding on the significance of each issue identified from the legal due diligence exercise.

#malaysiancorporatelawyer
#legalduediligence

This post was first posted on Linkedin on 18 May 2022.

17 Years in Private Practice
Lawyering
17 Years in Legal Practice

17 years. That is how long I have been in the legal profession. Over the years, there have been many transactions done and dusted, and many people I worked with on those transactions have since moved on to other paths. There are not many people I can turn to and …

Linkedin Post
Peak Period: A Moving Target for Corporate Lawyers

“When is your peak period?” I was asked. “Whenever the client wants the deal to go fast” I replied. The workload of corporate lawyers is not seasonal. It’s client-driven. The pace follows transaction timelines and clients’ expectations. What looks like a quiet period can quickly turn into full momentum overnight …

Linkedin Post
Partial Share Sales in Malaysia: What Sellers Need to Know About Guarantees

In partial disposals, it’s common for sellers and buyers to agree that any existing guarantees given by the sellers to secure banking facilities of the target companies will be adjusted to reflect the post-completion shareholding. For public listed companies (PLCs) in Malaysia, this can affect the deal timeline if not …