5. All actions and challenges to the asset must be reviewed by a competent lawyer. The purpose of verifying the supporting documents of these returns is to ensure that all activities of the company have been processed. Not having assets as part of the contract, financial due diligence is required regardless of the type of purchase, although the volume varies depending on the size and nature of the business. Financial due diligence is not a review of historical information, as it does not lead the accountant to provide notice of due diligence. The purpose of financial diligence is to analyze the quality of the financial information provided as a basis for evaluating the assets or shares to be acquired. The financial information analyzed may include: Before buying assets or buying shares, we recommend that buyers perform due diligence to inquire about the value of acquired assets or shares. The duty of care usually begins when the buyer and seller sign a letter of intent in a timely manner before a transaction is completed. If you are in the market to buy or sell a business, please email us at info@crow.legal in order to set up a time to discuss how we can help your transaction to make sure it runs as efficiently as possible. The extent of due diligence includes a checklist of included topics: buyers generally prefer to acquire assets because they do not support the company`s financial liabilities and are not exposed to undisclosed or unknown legal problems or threats. In addition, they benefit from a more depreciable „cost base“ for each asset, which can be depreciated to reduce current taxes.
In the case of a share sale, instead of an increase in the asset cost base, the purchaser receives an increased cost base for the acquired shares, which normally cannot be used against current taxes; the buyer must wait to sell the shares to realize the benefits of the increased cost base. Sellers generally prefer stock sales because they get a „clean break“ from the target company because the assets and liabilities are sold as a whole. In addition, capital gains from the sale can benefit from the lifetime capital income exemption, which significantly reduces the tax bill for the sale. An asset repurchase agreement is a contract that concludes the terms of an asset sale. Such an agreement is also necessary when only a portion of a company`s assets is sold. Some asset transfers during an asset sale, such as the transfer of intellectual property or real estate rights, make such a contract even more difficult. Prepaid assets can identify information about existing agreements for maintenance, support or other prepaid asset-related services. These agreements may cover third-party testing, distribution or development contracts. These agreements would also be part of the operation. Notify the buyer if there is a significant change in the value of an asset, or if there is a significant change in liability, finance or liability, While the balance sheet is the usual starting point, there are many other historical documents that need to be reviewed to ensure that the seller has a clear title in the assets.
