What is Due Diligence?
Due diligence is used to investigate and estimate a business opportunity. The term due diligence describes a broad duty to exercise care in any transaction. In isolation, it spans investigation into all relevant aspects of the past, present, and predictable future of the business of a target company. Due diligence sounds extraordinary but ultimately it translates into basic logical success factors such as "thinking things through" and "doing your groundwork".
Why does due diligence have special significance?
"Due diligence" is important as a legal defense for a person charged under occupational health and safety legislation. If charged, a defendant may be found not guilty if he or she can prove that due diligence was exercised. In other words, the defendant must be able to prove that all precautions, reasonable under the circumstances, were taken to protect the health and safety of workers.
How is Due Diligence Conducted?
The parties conducting due diligence generally create a checklist of needed information. Management of the target company prepares some of the information. Financial statements, business plans and other documents are reviewed. In addition, interviews and site visits are conducted. Finally, thorough research is conducted with external sources -- including customers, suppliers, industry experts, trade organizations, market research firms, and others.
How does an employer establish a due diligence program?
- The employer must provide the appropriate training and education to the employees so that they understand and carry out their work according to the established polices practices, and procedures.
- The employer must train the supervisors to ensure they are competent persons, as defined in legislation.
- The employer must monitor the workplace and ensure that employees are following the policies, practices, and procedures. Written documentation of progressive disciplining for breaches of safety rules is considered due diligence.
- There are obviously many requirements for the employer but workers also have responsibilities. They have a duty to take reasonable care to ensure the safety of themselves and their coworkers - this includes following safe work practices and complying with regulations.
- The employer should have an accident investigation and reporting system in place. Employees should be encouraged to report "near misses" and these should be investigated also. Incorporating information from these investigations into revised, improved policies, practices and procedures will also establish the employer is practicing due diligence.
Lines of Inquiry
- Corporate Structure
- Corporate History
- Background of Corporate Officers and Directors
- Assets Searching
- Real Property
- Intellectual Property Inquiries
- Litigation Involving the Company
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