Due Diligence on International Transactions

In the context of legal and economic globalization, legal due diligence has become an essential tool for ensuring the security, transparency, and viability of international transactions. Whether in mergers, acquisitions, joint ventures, or strategic alliances, a rigorous legal review allows for anticipating risks, protecting interests, and negotiating with an advantage. This article proposes a key checklist for addressing cross-border negotiations with legal soundness.

What is Legal Due Diligence?

It is the process of reviewing, verifying, and legally analyzing a company, asset, or project prior to a significant transaction. Its objective is to:

• Identify legal, contractual, and regulatory risks.

• Evaluate the target's current legal situation.

• Determine hidden contingencies that may affect the transaction.

• Provide input for contractual protection clauses (guarantees, indemnities, conditions precedent).

Key Checklist for Cross-Border Negotiations

1- Corporate Aspects

• Ownership and transfer regime of shares or interests.

• Bylaws, shareholder agreements, and corporate governance structure.

• Current powers and conflicts between partners.

• Previous corporate reorganizations.

2- Contracts and Obligations Assumed

• Commercial, financial, employment, and supply contracts.

• Change of control clauses, exclusivity, and penalties.

• Limitations on transferability or assignment.

• Risks arising from contracts with foreign jurisdictions.

3- Regulatory Compliance

• Licenses, permits, and administrative authorizations.

• Sectoral compliance (environmental, health, and financial).

• Compliance and crime prevention protocols.

• Risks of regulatory noncompliance in other jurisdictions.

4- Litigation and Contingencies

• Active judicial or administrative proceedings.

• Risks of future litigation arising from contracts or employment relationships.

• History of sanctions or audits.

• Possible criminal prosecutions.

5- Intellectual and Industrial Property

• Ownership of trademarks, patents, software, and know-how.

• License, assignment, or use agreements.

• Effective protection against third parties.

• Risks of infringement or unauthorized use.

6. Data Protection and Cybersecurity

• Compliance with local and international regulations (GDPR, LGPD, etc.).

• Internal processing and security policies.

• Risks of data breaches or regulatory sanctions.

7- Tax and Labor Aspects

• Tax compliance and risks of aggressive planning.

• Hidden labor liabilities, collective disputes.

• Expatriate contracts and international mobility.

• Risks of double taxation or bilateral agreements.

Strategic Best Practices

• Multidisciplinary team: Integrating lawyers, accountants, and sector experts.

• Clear roadmap: Define the scope, deadlines, and format of the report.

• Structured data room: Organized access to key documentation.

• Report with findings and recommendations: Translate risks into contractual clauses.

• Negotiation continuity: Involve the due diligence team in drafting the contract.

Information is power

A well-executed legal due diligence not only prevents surprises: It empowers the negotiation, allows for price adjustments, guarantees to be demanded, and the transaction to be structured with legal intelligence. In the world of international transactions, due diligence is not a cost: It is a strategic investment.