Due diligence refers to an investigation, examination, or audit conducted to confirm the facts relating to a matter under consideration.
The process is typically carried out when planning large-scale investments, restructuring, mergers, or acquisitions of companies that may impact the short, medium, or long-term financial situation.
In a new episode of "Legal 5 Minutes" on Radio Femenina, our associate lawyer, Rebeca Galdámez, shared with the audience how due diligence not only functions in these scenarios but also helps ensure that all aspects of an organization are in order.
"Due diligence is to ensure that we are fulfilling all our obligations. As the term implies, we must be diligent to ensure that our company is up to date with compliance as required by law," she stated.
Our expert explains that in addition to legal obligations, companies must meet other standards. For example, the payment of municipal taxes, the validity of operating licenses, and fiscal and administrative duties.
"We must also consider other aspects such as employee withholdings when paying to the Pension Fund Administrators and insurance with the Salvadoran Social Security Institute," she added.
Galdámez also emphasized that companies should seek legal advice, such as the services offered at Torres Legal, as there are cases where individuals have formed their companies over 15 years ago and have not registered them with government authorities.
Likewise, practicing due diligence can prevent other issues such as inspections at premises, problems with financial statements, potential closure of premises, or a failed merger or acquisition.
Due diligence can encompass areas such as analysis of financial, tax, and legal information; accounting auditing; study of management information; analysis of organizational structure and human resources; analysis of information technology; computer security auditing; business auditing and commercial characteristics.
If you want to learn more about the obligations and risks that can be avoided in your organization, you can contact the Corporate Law Department at Torres Legal.
-Written by the Torres Legal Team.