Ayush Patidar, School of Law, UPES
INTRODUCTION
The due diligence process is inherently dynamic and complex. Although not legally defined, it typically involves gathering information about an acquirer or issuer to help draft and evaluate disclosures in offer documents. These disclosures aim to provide company members or potential investors with a clear understanding of the purpose and parties involved in securities transactions. There is no rigid formula or fixed benchmark for due diligence; the law requires only "reasonable diligence" from experts. A relevant case in this context is Chander Kanta Bansal v. Rajendar Singh Anand1, where the Supreme Court stated that due diligence involves reasonable care and doing everything reasonable, rather than everything possible.
The Oxford Dictionary (2006 edition) defines "diligence" as the careful and persistent application or effort. It describes "diligent" as being careful and consistent in performing one's work and duties, demonstrating care and effort.
According to Black's Law Dictionary (18th edition), "due diligence" refers to the level of diligence that a person seeking to fulfill a legal requirement or discharge an obligation would reasonably and ordinarily be expected to exercise. It means the kind of diligence a prudent person would apply in managing their own affairs.
Outcome of Due diligence- Once due diligence is complete, the outcome will determine whether to proceed with the deal or not. If the findings are favorable and align with the buyer’s expectations, the deal moves forward. In this case, the next steps involve finalizing agreements by drafting contracts, including purchase agreements and other relevant documents, while possibly adjusting terms and conditions to address any issues uncovered during due diligence. Securing financing is also crucial, which may involve negotiating loans or arranging equity investments, along with detailed financial planning to ensure cash flow and budgetary needs are met.
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