Purchase of a business share of the company

Due Diligence

In these difficult business times, when many companies are struggling, there are sales of shares in companies or entire companies. Buying is also attractive to many investors, but can be complicated and time-consuming.


Our client wanted to buy a business share in this way. However, he did not know what assets, liabilities and debts the company had. He did not know their exact specifications.


It is very important to consider the purchase of a business share carefully, to be aware of the risks and to avoid unexpected situations. Well-prepared documents from legal representatives and subsequent accounting and tax due diligence are essential. The seller should confirm that he has provided true and complete accounting or other information about the business. To ensure that the seller does not misrepresent the accounting and legal status of the business, it is a good idea to provide a personal guarantee in case the information provided is false.


For the above-mentioned client, we reviewed the accounting information, assessed the state of the company based on the books of accounts (general ledger, working balance sheet, accounts payable, accounts receivable, asset cards, etc.) and highlighted any potential risks. We requested a backup of the accounting database from current bookkeeper. In addition, we obtained the loan agreements to determine their terms and conditions and to gain a more detailed understanding of the movements in the individual accounts. We explained to the client the differences in his rights and obligations in cases where he buys a share in a company or the company as a whole, i.e. with all assets, liabilities, receivables, employees. In the latter case, all tax obligations would pass to him.


If you are also considering buying a shareholding or the whole company, we strongly recommend that you always carry out very careful due diligence before entering into any contracts. If the current owner of the company avoids providing any documents or information, this should be a warning sign to you that they are probably not playing a “clean” game with you.

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