This document summarizes the key steps and techniques for conducting legal due diligence for cross-border M&A transactions. It discusses the scope of legal due diligence, including types of investigations and documents to review. It outlines important legal aspects to examine regarding the target company and its business. The document also addresses common requirements for legal due diligence, such as letters of intent and parties' obligations. It provides techniques for efficient due diligence investigations and identifies potential problems and risks to consider.

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LEGAL DUE DILIGENCE FOR CROSS-BORDER
M&A TRANSACTIONS
Kowit Somwaiya
Managing Partner
LawPlus Ltd.
25th June 2019
Cross-Border Mergers & Acquisitions
OmegaWorldClass Research Institute

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The information provided in this document is general in nature and may not
apply to any specific situation. Specific advice should be sought before taking
any action based on the information provided. Under no circumstances shall
LawPlus Ltd. or any of its directors, partners and lawyers be liable for any
direct or indirect, incidental or consequential loss or damage that results from
the use of or the reliance upon the information contained in this document.
Copyright © 2019 LawPlus Ltd.

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Kowit Somwaiya
• Managing Partner, LawPlus Ltd.
• Managing Partner, LawPlus Myanmar Ltd.
• Board of Directors, INTA
• Anti-Counterfeiting Committee, APAA
• B.A. (Education – English), Ubon Ratchathani Rajbhat University
• LL.B., Thammasat University
• LL.M., University of Illinois
• Certificate of Instruction for Lawyers, Harvard Law School

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LawPlus Ltd.
• Established in 2003
• Major practices
 Banking and finance
 Corporate and M&A
 FDI and investment promotion
 IP and ICT
 Dispute resolution and litigation
• Rankings:
• www.lawplusltd.com

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Presentation Topics
 Scope of Legal Due Diligence (“LDD”) in Cross-Border M&A
Transactions
 Legal Aspects of Target Company (“TC”) and Its Business: Key
Issues
 LDD Requirements, Agreements and Obligations
 Techniques for Conducting Cross-Border LDD
 Key Steps of Cross-Border LDD Investigation
 Problems in LDD
 Risks in Cross-Border M&A
 Case Study

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Scope of LDD in Cross-Border M&A Transactions:
Types of LDD
 Limited LDD: Limited Investigation
- basic corporate documents of 3-5 years
- material transaction documents of high values
- no asset investigation
- no litigation investigation
 Full LDD: Full Investigation
- corporate documents starting from registration
date or at least 10 years
- HR documents
- transaction documents
- assets, licenses and permits
- litigation and disputes

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Scope of LDD in Cross-Border M&A Transactions:
Independent Searches on TC
 Company Search: Company Affidavit,
objectives, MOA, AOA, lists of
shareholders
 Property Searches: Lands, buildings,
factories, machinery, intellectual property,
vehicles
 Insolvency Search: Central Bankruptcy
Court
 Bankruptcy Search: Legal Execution
Department
 Litigation Searches:Criminal cases
and civil cases

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Scope of LDD in Cross-Border M&A Transactions:
Review of LDD Documents
 Documents on Company Registration and Corporate Matters
- Registration details
- Business objectives
- Business operation
- Minutes of AGMs, EGMs and BOD meetings
- Shareholders Agreement/Joint Venture Agreement
 Permits and Licenses
- Investment promotion certificate
- Foreign Business License/Foreign Business Certificate
- Factory construction and factory operation licenses
- Other licenses for business operation

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Scope of LDD in Cross-Border M&A Transactions:
Review of LDD Documents
 Major Commercial Transaction Agreements
- Sale and Purchase Agreements
- Distribution Agreements
- Manufacturing Agreements
- Confidentiality Agreements
 Major Investment and Internal Transaction
Documents
- Transactions with directors or persons related to
or associated with directors or major shareholders
- Joint venture or partnership agreements with
business partners or within the group of the TC

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Scope of LDD in Cross-Border M&A Transactions:
Review of LDD Documents
 Borrowings and Liabilities
- Loan Agreements, B/E, P/N, O/D, T/R, L/C, SBLC
- Guarantee Agreements
- Assignment Agreements
- Mortgage Agreements
- Pledge Agreements
- Business Collateral Agreements
- Factoring Agreements
- Foreign exchange hedging and other derivatives agreements
 Land, Buildings, Factories, Machinery and Other Assets
- Land title deeds, machinery ownership documents, vehicle registration books
- Land Lease Agreements, Office Lease Agreements, Machinery Lease Agreements
- Lists and details of account receivables and inventories

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Scope of LDD in Cross-Border M&A Transactions:
Review of LDD Documents
 Labour Protection and Employment Matters
- List and details of employees
- Work Rules and Code of Conduct
- Employment contracts / Employment service (sub-contract) agreements
- Benefit schemes (stock option plan, profit sharing schemes, etc.)
- Registrations and filings with SSF and WCF
- Insurance policies for directors and employees
- Labour union documents
- Work permits for non-Thai employees
 Filings and Reports
- Regulatory filings (in relation to company registration and operation, employment, etc.)
- Government reports (in relation to investment, promotion, environment, money
laundering, exchange control, etc.)

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Scope of LDD in Cross-Border M&A Transactions:
Review of LDD Documents
 Intellectual Property and Information Technology
- Trademark applications and trademark registration certificates
- Patent and design applications and registration certificates
- Domain name and website and related agreements
- Trademark License Agreements, Patent License Agreements, Copyright License
Agreements
- Software License Agreements
- IT and Data Service Agreements
 Litigation Documents
- Reports on pending lawsuits, arbitration proceedings, demand notices and potential
disputes
- Copies of claims, answers, court orders and judgements
- Confirmation letter of directors in relation to litigation

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Legal Aspects of TC and Its Business: Key Issues
 Check key issues in LLD Report
 Jurisdiction / country of registration
- Registered office
- Head office
- Branches
 Shareholding structure
- Local shareholders and foreign shareholders
- Foreign ownership limit
- Parent companies and ultimate shareholders
- Subsidiaries, related companies, associated companies, affiliated
companies
 Board of directors and their authorizations (authorized directors)
 Objectives, core business and related (ancillary) businesses

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Legal Aspects of TC and Its Business: Key Issues
 Major provisions of AOA
- Transactions required approvals from BOD/shareholders
- Requirements for calling BOD meeting/shareholders meeting
- Pre-emptive rights of shareholders
 Licenses/permits for operating business and other filings with authorities
 Major assets
- Tangible assets
- Intangible assets
 Existing liabilities/obligations
- Duties and liabilities under material agreements
- Payments of compensation for judgement damages, etc.
 Existing lawsuits disputes and potential disputes

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LDD Requirements, Agreements and Obligations:
Letter of Intent (“LOI”)
 Signed by seller and acquirer prior to LDD
 Intention to enter into M&A transaction, subject to:-
- LDD investigation
- successful negotiation and execution of SPA or APA
 Details of shares or assets to be acquired and their prices
 LDD investigation commitment
 Exclusivity period for LDD investigation and negotiations of SPA
 Non-disclosure undertakings during and post exclusivity period

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LDD Requirements, Agreements and Obligations:
Obligations of Seller, TC and Acquirer
 Seller and TC
- Making LDD documents available in a prompt manner
- Making full disclosure of LDD documents
- Being cooperative in giving additional LDD documents, explanations,
clarifications or confirmation letters
 Acquirer
- Appointing lawyers for LDD investigation
- Giving lists of LDD documents to seller and TC
- Asking for additional documents and more information as lawyers may direct
- Communicating and meeting with seller and TC to clarify unclear issues

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Techniques for Conducting Cross-Border LDD
 Quick checking basic information
- Obtaining basic information on TC and its business
- Checking basic information on TC and its shareholder (seller)
 Obtaining LDD documents
- LDD data room and sufficient accession must be made available
- List of LDD documents must be prepared and given promptly
- Additional LDD documents must be obtained from TC promptly
- Cooperation from TC must be requested
 Allocating LDD documents for reviewing
- Reviewing by lawyers having relevant experience and expertise
- Templates for summary of documents reviewed
- Setting up timeframe and deadline for LDD investigations

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Techniques for Conducting Cross-Border LDD
 Meeting with TC
- Meeting if necessary for clarification of unclear or suspicious issues
- Checking originals of documents if necessary
- Clarification letter may be necessary
 Independent searches
- Necessary for documents available to the public
- Online searches where possible
- Relying on independent search results if they conflict with those given by TC
 Focusing on legal risks
- Existing legal risks
- Future legal risks that may occur
- Add them as red flags in the LDD report

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Techniques for Conducting Cross-Border LDD
 Post LDD opinion and advice
- Given if critical legal risks are found in order to mitigate risks
- Opinion on validity and enforceability of documents
- Opinion on regulatory compliance
- Determining and assessing legal risks
- Advice on legal issues and measures to mitigate legal risks
 Avoid delay and cost-overun
- Act fast by all parties
- Take several steps parallelly

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Key Steps of Cross-Border LDD Investigation
(1) • Signing LOI by Buyer and Seller
(2) • Appointment of LDD Lawyers by Buyer
(3)
• Independent Searches on TC
(4) • Obtaining LDD Documents from TC
(5) • Reviewing of LDD Documents
(6) • Clarification Meeting with TC
(7)
• Issuing LDD Report to Buyer
 7 Key Steps
 Post LDD opinion and advice given separately if required
 7 Key Steps

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Problems in LDD
Incomplete
Documents
Missing
Documents
Lack of
Cooperation
from TC
Concealment
of Facts and
Documents
No Data
Room
Limited
Access to
Documents
Limited Track
Records
 Major Problems
 Suggested Solutions
- Seller’s instructions to TC to cooperate
- TC’s written clarifications on missing documents
Problems

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Risks in Cross-Border M&A
 Differences in language, culture and management style
 Unfamiliar laws and regulations
 Missing corporate and compliance documents
 Breaches of material agreements
 Internal fraudulent transactions
 Borrowing and liabilities
 Failure to comply with laws, e.g. failure to obtain or renew licenses/permits,
failure to file required reports
 Violation of laws related to business operation, e.g. foreign ownership limit,
money laundering, tax evasion
 Pending legal proceedings, e.g. claims by financial creditors on default of
debts repayments, enforcement of securities

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Case Study 1
 Our client, acquirer, a Korean company
 LDD at office/factory of target company in Rayong
 LDD investigation on database and printed documents + clarification
meetings on both legal and technical issues and physical checks of
machinery and inventory
 Within 3 working days
 Lawyer team and client’s technical-business team work at the same
time
 Full cooperation of TC’s team
 M&A deal succeed in 2 months (with SPA signed)

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Case Study 2
 Our client, acquirer, a BVI company owned by a Thai company
 LDD on seller and its NPL portfolio (accounts receivable)
 Seller is registered in BVI with HQ address in Hong Kong and its
authorized director is a Hong Kong company
 LDD took place in Thailand, Singapore and BVI (by us and our client’s
foreign lawyers)
 Lots of notarizations (and legalizations for post M&A rehabilitation of
the Thai parent company of the acquirer at the Central Bankruptcy
Court)
 M&A deal succeeded
 Business rehabilitation succeeded with THB1.5 billion debt written off

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Case Study 3
 Our client, an Australian petroleum engineering services company
 LDD against an engineering TC in Thailand to acquire shares in TC
 TC did not have data room. Documents were at different rooms on
different floors with different departments
 A lot of missing documents and incomplete documents
 Minimal and slow cooperation from TC in giving clarifications and
confirmations of facts and documents in need of clarifications
 LDD took 6 months before LDD Report could be issued with a lot of
qualifications
 Deal failed

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Case Study 4
 Our client is registered in Singapore
 TC is a Thai company holding licenses to develop and operate a marina
project on state property (under control of the Treasury Department,
the Marine Department and the Navy)
 LDD was involved with complicated concessions and permits and
investment promotion conditions
 LDD took place at the same time with negotiations of SPA and SHA
 Lengthy negotiations but in good faith
 M&A deal succeeded with signing of SPA, SHA and other transaction
agreements
 LDD and negotiations of agreements took 1.5 years

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