Introduction Link to heading
Legal due diligence (LDD) is a critical step in mergers, acquisitions, investments, and even strategic partnerships. It’s the process of evaluating a company’s legal health—its contracts, ownership structure, regulatory compliance, and potential liabilities.
Unfortunately, many South African businesses are unprepared when due diligence hits. Important documents are outdated, shareholder agreements are missing, or legal risks have not been disclosed. This slows down deals, erodes trust, and can even result in the loss of opportunity.
In this article, I’ll outline what legal due diligence entails, what documents are expected, and how to prepare your business well in advance.
What Is Legal Due Diligence? Link to heading
Legal due diligence is the investigation and analysis of a company’s legal position prior to a business transaction. This is usually performed by the buyer or investor and covers a wide range of areas, such as:
- Corporate structure and governance
- Shareholding and beneficial ownership
- Material contracts (leases, loans, supply agreements)
- Employment compliance
- Litigation and disputes
- Intellectual property and licensing
- Regulatory compliance (e.g., FICA, POPIA, Companies Act)
The goal is to uncover legal risks that could impact the value, viability, or terms of a deal.
Common Mistakes Businesses Make Link to heading
- Poor record-keeping: Missing CIPC documents, unsigned contracts, or outdated MOIs
- Informal agreements: Handshake deals that aren’t enforceable
- Non-compliance with regulation: No RMCP, B-BBEE certificates, or FIC registration
- Disorganised IP ownership: Brand names or domains not registered or assigned properly
- Shareholder disputes not resolved: Unrecorded exits or vague rights can derail transactions
Buyers view these issues as red flags and may use them to negotiate lower valuations or walk away.
How to Prepare Your Business for Legal Due Diligence Link to heading
- Create a virtual data room: Store all relevant corporate, tax, and compliance documents in a secure, shareable format.
- Review corporate governance: Ensure your MOI, resolutions, and director appointments are up to date with the CIPC.
- Formalise all agreements: Make sure leases, employment contracts, and supplier terms are signed and enforceable.
- Address skeletons early: Disclose disputes or unresolved issues upfront—surprises kill deals.
- Keep your compliance files current: Include FICA, POPIA, SARS, COIDA, UIF, and labour documentation.
Final Thoughts: Treat Due Diligence as a Readiness Exercise Link to heading
Preparing for legal due diligence isn’t just for the moment a deal is on the table. It should be part of good business hygiene.
Well-organised, transparent businesses command better terms, attract stronger investors, and face fewer legal delays. Whether you’re looking for growth, an exit, or a strategic partner—due diligence starts long before anyone knocks on your door.
Contact Link to heading
Need help preparing for legal due diligence or reviewing your compliance documents?
I assist businesses with legal health checks, document reviews, and readiness audits to ensure you’re always transaction-ready.
Peet Roodt | Legal & Compliance Adviser
📧 [email protected]
🌐 www.peetroodt.co.za