Legal documents that are required for due diligence include those related to a company's assets, business operations, and any potential liabilities. This review is typically conducted before a merger or acquisition and is crucial to determine value for the company. It also helps to understand the potential risks associated with an acquisition by reviewing contracts, agreements, and any restrictions or encumbrances that apply to assets.

Lawyers will also scrutinize financial information, such as federal and State tax returns, bank accounts and credit reports in addition to physical assets. They will also look at the company's contracts, employment benefits, payroll and organizational structure. Legal due diligence may take between 30 to 60 days. For more complex transactions, the length of time can increase significantly.

Attorneys also will look into regulatory issues, including compliance concerns or antitrust analyses(opens in a new tab). They will also review the company's current legal landscape and any litigation that involves the company in question or its officers.

Examining the risk of an investment is the most important part of the legal diligence investigation. Attorneys often recommend that you purchase representations and warranties insurance (opens in the new tab) for the purchase. This is particularly important when the buyer is not familiar with the history of the company they are purchasing. It can protect the seller from misleading assertions or claims made by the buyer. Additionally, lawyers can examine any documentation of the policies of the company's employees for example, severance agreements and golden parachutes(opens in a new tab), which could be affected by a change of ownership.