Due Diligence refers to an investigation, examination, or audit conducted to verify the facts related to a matter under consideration.

The process is typically undertaken when planning large-scale investments, restructuring, mergers, or acquisitions of companies that could impact the short, medium, or long-term financial situation.

In a new episode of “Legal Insights in 5 Minutes” on Radio Femenina, our associate lawyer, Rebeca Galdámez, shared with the audience how Due Diligence is not only relevant in these scenarios but also crucial for keeping all the details of an organization in compliance.

“Due Diligence is to ensure that we are fulfilling all our obligations. So, as the word suggests, we must be diligent to ensure that our Company is up-to-date with legal compliance,” she stated.

Our expert explains that, in addition to legal obligations, companies must meet other standards. These may include municipal tax payments, the validity of operating licenses, tax and administrative duties.

“We should also consider other aspects like withholding taxes from employees when paying to Pension Fund Administrators and ensuring insurance coverage with the Salvadoran Social Security Institute,” she added.

Galdámez also pointed out that companies should seek legal advice, such as what we offer at Torres Legal, as there are cases of individuals who established their companies over 15 years ago and failed to register them with government authorities.

Similarly, the practice of Due Diligence can help prevent other issues like inspections at premises, problems with financial statements, potential closure of locations, or a failed merger or acquisition.

Due Diligence can encompass areas such as financial, tax, and legal information analysis; accounting audit; management information analysis; organizational structure and human resources analysis; information technology analysis; information security audit; and business and commercial characteristics audit.

If you want to learn more about the obligations and risks that can be avoided in your organization, you can contact the Corporate Law Department at Torres Legal.