Conducting a legal due diligence review in a share purchase transaction
Conducting a legal due diligence review in a share purchase transaction

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Conducting a legal due diligence review in a share purchase transaction
  • Reviewing contracts
  • Reviewing corporate documentation
  • Searching public registers

This Practice Note is part of the Share purchase transaction toolkit.

Conducting legal due diligence will involve reviewing documents made available by the seller in a data room or sent to the buyer for review. This will usually include reviewing various types of contracts (which may be of a specialist nature), as well as various records, ledgers and lists. The corporate lawyer will always be involved in reviewing corporate documents on a share purchase transaction, such as the company's articles of association and statutory books and records.

Due diligence should always also include conducting searches of public registers, such as Companies House and HM Land Registry. The disclosure letter will be likely to include general disclosures of information contained in such public register searches (the buyer should insist that these are searches actually made, rather than accepting information that would have been discovered if a search had been made).

The buyer's legal due diligence will generally focus on the following issues:

  1. title (seller's title in sale shares, as well as title to key assets, property and rights)

  2. licences and consents (existence and continued availability of licences, permissions and consents required to carry on the business)

  3. material contracts (whether there are any unusual contractual terms in key contracts with main customers/suppliers, especially price/payment and term/termination)

  4. change of control (whether the acquisition will trigger a change