It is very important to carry out the due diligence procedure between the conduct of negotiations and the completion of the process in a company merger and acquisition process. The third party due diligence procedure reveals all of the company's characteristics.
What is Third Party Due Diligence?
Due diligence is the company's legal status and lawsuits, financial situation, current tax status, portfolio, human resources, assets, etc., to be merged or acquired. It is an operation carried out to see the entire situation. The concept of the third party due diligence, which is the subject of legal studies in the field of Commercial Law, is not specifically regulated in the field of Law of Obligations in terms of the relevant provisions of the Turkish Code of Obligations No. 6098 and the Turkish Commercial Code No. 6102.
Key Aspects of Third-Party Due Diligence in Turkey
The concept of third-party due diligence emerged during company mergers or company acquisitions in Turkey. During the Due Diligence process, the basic feasibility of the company to be merged or the company planned to be acquired is carried out. Due diligence transactions are generally carried out jointly by law firms and financial advisors in Turkey.
As a Turkish law firm, Istanbul Lawyer Firm helps you to prepare merger or acquisition agreements within Turkish corporate law. Before these contracts are ready, the Turkish business lawyers examine all compensation, labor, administrative, commercial, criminal, and tax cases to which the company subject to merger or acquisition is a party. Likewise, enforcement and bankruptcy files to which the company is a party are examined in full detail. A third party must do due diligence. The Turkish law firm should generally conduct due diligence under the Turkish Commercial Code No. 6102.
Benefits of Third-Party Due Diligence
The due diligence process carried out by a third party is a must-do process as it reveals all aspects of the company to be merged or acquired. All the pros and cons of the company being merged or taken over are evaluated, and the benefits of the planned transaction are revealed. Major damages may occur if the third party due diligence process is not carried out. Therefore, it is very important, especially for foreigners, to get help from an English-speaking Turkish lawyer who is an expert in this field.
How Do You Perform Third-Party Due Diligence?
During third-party due diligence transactions, the Turkish law firm investigates the company's records that are being considered for merger or acquisition. First, the government records of the target company are examined. Afterwards, the notifications made by the target company in the Trade Registry are examined. All legal, administrative, commercial, business, criminal, enforcement, and bankruptcy files to which the target company is a party are questioned. How the Target Company's transactions are covered or reported in the media is examined.
Afterward, the Turkish law firm and financial experts examined the target company's financial statements in detail. The Turkish law firm questions all assets of the Target Company. If there is any mortgage, annotation, or lien on the assets, these are noted. After collecting all the information, the Turkish law firm creates a due diligence report.
The third party due diligence report prepares the company's articles of association and shareholders' agreement to be signed between the two companies. In this way, the two parties agree on all target company issues. The Turkish law firm prepares AOA and SHA contracts using the third party due diligence report. Foreigners need to receive support from English-speaking lawyers in Turkey during third-party due diligence procedures.
Government Databases
The information in the state databases of the target company for which the merger or acquisition is being considered must be included in the third party due diligence report. In State Databases, the target company's capital amount, tax number, mersis number, current address, branches, shareholders, and chairman of the board of directors can be accessed. This information must be included in the third party due diligence report.
Trade Registries
The trade registry records of the target company for which the merger or acquisition is being considered must be examined in detail. All information regarding the capital increases made by the target company, dividends paid, address changes, branches closed or opened, share transfers made, and past managers can be accessed from the trade registry records. All this information must be included in the third party due diligence report.
Courts and Judicial Records
Compensation, labor, commercial, civil, criminal, administrative, tax, enforcement, and bankruptcy cases to which the target company, which is being considered for merger or acquisition, is a party throughout Turkey are questioned. As a result of the interrogation, all lawsuits and enforcement files are examined in detail. All information is written in detail in the third party due diligence report. Thus, no unforeseen situation will arise after the merger or acquisition. All identified information will be specified in the AOA and SHA agreements.
Media
The news published in the media, the notifications made to the Public Disclosure Platform, and the news about the managers of the target company for which the merger or acquisition is being considered are also examined in detail. All details are included in the third party due diligence report.
Professional Service Providers
The Turkish Law Firm will examine the contracts and obligations of the target company for which the merger or acquisition is being considered. Once the review is completed, all liabilities will be detailed in the third party due diligence report.
Financial Statements
The Turkish Law Firm will examine the properties, vehicles, other assets, land, immovable property, or intellectual property rights and licenses of the target company for which the merger or acquisition is being considered. The title deed records of the target company's real estate will be examined in detail, and whether there is any mortgage, lien, or judgment will be checked. The records of the movable assets owned by the target company will also be examined and checked to determine any liens or pledges.
Regulatory Authorities
Depending on the field of activity of the target company for which the merger or acquisition is being considered, permission may be required from the regulatory authorities in Turkey. These regulatory authorities include the Competition Authority, Capital Markets Board, and Banking Regulation and Supervision Board. If permission is required from these institutions for the acquisition or merger of the target company, the third party due diligence report will detail whether consent should be obtained and how the procedure will be carried out.
Intellectual Property Offices
Issues such as trademark, patent, utility model, industrial design, and geographical indication ns of the target company, which is planned to be merged or acquired, must also be legally examined by the Turkish Trademark and Patent Office. The Turkish law firm must also discuss the target company's license and franchise agreements in detail. All issues will be detailed in the third party due diligence report. In carrying out all these procedures, getting support from an English English-speaking lawyer in Turkey is necessary.
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