Due diligence Definition | Legal Glossary | LexisNexis (2024)

FAQs

Due diligence Definition | Legal Glossary | LexisNexis? ›

A definition of due diligence: The exercise of reasonable care in the course of business. According to Cambridge Dictionary, Due diligence meaning is: “The detailed examination of a company and its financial records, done before becoming involved in a business arrangement with it.” Read more.

Due Diligence is a process that involves risk and compliance check, conducting an investigation, review, or audit to verify facts and information about a particular subject.

Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party.

It involves conducting thorough research and analysis of various areas related to the company you are interested in purchasing. In this article, we'll discuss the three main types of due diligence – Financial, Operational/Management, and Legal – and explain why each one is important.

Definition & Citations:

Such a measure of prudence, activity, or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent man under the particular circ*mstances; not measured by any absolute standard, but depending on the relative facts of the special case.

Examples of legal due diligence are careful examination of all material contracts, including partnership agreements, licensing agreements, guarantees, and loan and bank financing agreements. Protect yourself from critical risk in your next transaction.

Due diligence is the steps an organization takes to thoroughly investigate and verify an entity before initiating a business arrangement, whether that's with a vendor, a third party or a client. In the general business sense, due diligence means vetting issues that affect the business thoughtfully and carefully.

The 4 P's of due diligence are People, Performance, Philosophy, and Process. These key elements form the foundation of a thorough due diligence process, covering aspects related to the team involved, performance metrics, investment philosophy, and the overall process followed.

Due diligence involves ongoing communication

An enterprise should account for how it identifies and addresses actual or potential adverse impacts and should communicate accordingly. Information should be accessible to its intended audiences (e.g. stakeholders, investors, consumers, etc.)

What is the legal clause due diligence? ›

A due diligence investigation clause providing a purchaser with the right to perform due diligence investigations on the property after it has executed the purchase and sale agreement, including title searches and physical investigations on the property.

Due Diligence Synonyms

Analysis, assessment, audit, examination, review, survey, verification, investigation.

This is a non-exhaustive list of information and documentation that will be needed in the due diligence process. As each investigation will differ in terms of needed materials, the below can serve as a preparatory guide.

What does due diligence mean? Due diligence most generally means reasonable care and caution or the proper actions that a situation calls for, especially those that help to avoid harm or risk.

It is the diligence that is expected from someone who seeks to satisfy a legal requirement or discharge an obligation. Example: If you are a student and have an assignment due, reasonable diligence would mean that you start working on it well before the deadline, put in the necessary effort, and submit it on time.

Quick Answer. In real estate, due diligence is the period of time between an accepted offer and closing. It gives you, the buyer, time to get an appraisal, a title search, perform property inspections and more, so you know you're getting what you're paying for.