2. danevychlaw.com
IN WHAT WAY DOES IT WORK?
Analyzing everything we buy
Identifying and estimating risks
Closing the deal
3. danevychlaw.com
OUR TEAM AND EXPERTISE
Our key spheres of expertise:
• Agriculture
• Life Sciences
• Corporate/M&A
• Employment
• Industry
• Energy and Power
Dan-Farm Ukraine
Our Clients in different spheres:
5. danevychlaw.com
Legal due diligence: WHY IS IT IMPORTANT?
For the Buyer
(on his/her own initiative)
For the Seller
(on his/her own initiative)
Opportunity to estimate real value of the
Object
Identify «deal breaking» risks, or risks, which
may influence the deal cost
Necessary if loan is needed for making a
deal
Opportunity to identify and eliminate/
correct disadvantages/risks, which
may reduce the cost of the Object
immensely or make a deal impossible
6. danevychlaw.com
Legal due diligence: what is necessary to check?
If an individual is involved in
alienation procedure, it’s
necessary to submit spouse’s
consent certified by notary;
We recommend to register
alienation on the contractual
basis and notarize as well
Minutes of
shareholders
meetings/Registration
Board of shareholders;
due registration of all
previous Company’s
shares alienation
I. Corporate Company Structure
Declaring of all Company’s deals invalid since
the moment of violation
Correct registration of
statutory documents and
amendments to them
Correct registration of alienation
of shares in statutory capital
Corporate history and
structure
7. danevychlaw.com
In some cases, in
order to make this
deal, permission of
AMC of Ukraine is
required
Participants of
concentration (which are
taken into account when
calculating total value of
assets) are legal entities
and physical persons of the
seller and buyer as well as
persons associated with
them
25% or 50% authorized
capital purchase of the
company is considered to
be economic
concentration
Legal due diligence : what is necessary to check?
II. Compliance with antimonopoly legislation
In case of violations – a fine of up to 5% of revenue
received from all sold goods/services of all
participants to the concentration all over the world
for the previous financial year + invalidation of the
sale of Company’s assets
8. danevychlaw.com
- Due registration of Company’s contracts
- Current Company’s obligations under contracts
- Liability under contracts
- Having any initiated, current or suspended court
proceedings in which Company is a party
- Having clear enforcement proceedings regarding or in
the interest of Company
Legal due diligence: what is necessary to check?
IIІ. Contracts and litigation
All obligations and risks under current
contracts as well as participation burden in
court hearings and subsequent enforcement
shall be passed to a new owner
9. danevychlaw.com
IV. Land
Difficulties with registration of property
rights on land for a new owner
Land rights
(property/ rent)
Designated
purpose
Encumbrances
and restrictions
in use
Legal due diligence: what is necessary to check?
Attention! Since January 1, 2013 registration in the State
Register of Mortgages and in the Unified Register of
Prohibitions of Alienations of Immovable Property is
suspended. BUT! Extracts from these Registers can be
obtained in State Register of Ukraine
10. danevychlaw.com
Legal due diligence: what is necessary to check?
Attention!
Since January 1, 2013 registration in the State
Register of Mortgages and in the Unified Register
of Prohibitions of Alienations of Immovable
Property is suspended. BUT! Extracts from these
Registers can be obtained in State Register of
Ukraine
Difficulties with registration of property
rights in land for a new owner
Commissioning Encumbrances
V. Real Estate
Documents of
title + technical
documentation
11. danevychlaw.com
VI. Permissions and licenses
Legal due diligence: what is necessary to check?
SANITARY – sanitary-epidemiological services’ conclusions
FIRE SAFETY – permission to start work
ECOLOGICAL – permissions and limits re waste disposal, air emissions, special water use, use
of subsoil resources, etc.
VETERINARY – passports for animals
LICENSES FOR SECIFIC KINDS OF ACTIVITY – for instance, trade with genetic resources
LABOUR PROTECTION - instructions on fire, technical safety, floor evacuation plans, protective
clothes and etc.
12. danevychlaw.com
Acts/minutes/ reports on conducted
scheduled/non-scheduled inspections of
the Object
Identified violations
Actual implementation of requirements
and recommendations of inspection
authorities
Legal due diligence: what is necessary to check?
VII. Interaction with regulatory authorities.
Inspections.
What is checked?
Penalties imposed on Company and liability of
officials for non-compliance with regulatory
authorities’ prescriptions
13. danevychlaw.com
Accounting and financial records of
Company (balance, report on financial
results, report on money transactions +
annexes)
Tax inspections conclusions
Information on current accounts of
Company
Currency regulation
Financial risks
Outstanding tax obligations
Tax risks
Attention! It’s necessary to
inspect documents for the
last 3 years, or since the
moment of conducting last
tax inspection, if it was later.
Negative financial consequences for buyer.
Possible litigations
Attention! Due diligence may reveal the
factors, which can significantly influence
the cost of the deal much
What is checked? What to look for?
Financial/tax due diligence
14. danevychlaw.com
Compliance of territories, premises, production
with sanitary, ecological, veterinary,
epidemiological requirements
Presence and validity of permissive
documents, necessary for Object’s activity
Sanitary/veterinary/ ecological/epidemiological
inspections’ conclusions
New Object’s owner will not be able to conduct commercial
activity
Attention! Travelling to location is
strongly recommended to make sure,
that real situation corresponds to the
documented one
What is checked?
Ecological due diligence
15. danevychlaw.com
Closing the deal
Choosing the subject of the deal: assets or corporate rights. When choosing, it’s
necessary to evaluate tax aspects, requirements of antimonopoly legislation, peculiarities of
corporate history of the deal object, the necessity to obtain new permits/licenses for a new
legal entity etc.
If subject of sale is assets (including immovable property) – notarization and registration of
the deal are obligatory. If the subject of deal is corporate rights – notarization is
recommended (registrars’ practice)
If the Buyer is a non-resident:
(i) Requirements to foreign economic contracts
(ii) Currency regulation
IMPORTANT TO
TAKE INTO
ACCOUNT!
Attention! Assets are subject to
taxation – tax obligations incur (VAT)
16. danevychlaw.com
Closing the deal
For the Buyer For the Seller
Indicate all assets, that are the subject to
deal (we recommend making a separate
annex to contract)
If payment is carried out in several stages:
(i) Clearly identify the moment of transferring
of property rights to assets/corporate rights
(ii) Draw up guarantees and liabilities to
implement obligations under contract. Draw
up detailed distribution of risks between the
parties.
Check creditworthiness and
reputation of Buyer
Payment guarantee: deposit or bank
guarantee
If payment stipulates several stages
– clearly identify stages and terms
of payment
