How to Check a Company Before Buying?

Most often it is profitable, for example, in the following cases:

• Purchase of ready operating business in Ukraine. 

• If a legal entity is the owner of any assets, such as real estate or land. Thus, LLC may not even operate in the full sense of the word, but possess certain assets that can be transferred along with the ownership of the LLC.

• The LLC has a lease or sublease agreement with the state or municipal property fund. In such cases, the new purchaser will also be able to conduct its further activities in the premises it needs (as part of the agreement).

• Participation in tenders and bidding. We have encountered situations where an entrepreneur urgently needed a company with a certain license, and ideally one that was registered more than 6 months or a year ago, to participate in a tender. Thus, the entrepreneur saves time on the registration of LLC and obtaining licenses, and can immediately apply for participation in the tender he needs.

What does our pre-sales inspection of the company consist of?

Again, the sources of information and objects of inspection will vary depending on the company you choose and the goals of the transaction. Having considered your case personally, we will choose the best algorithm of actions.

Depending on the situation, during pre-sale inspection of the LLC can carry out the following inspections:

Checking the constituent documents of the company for sale.

The simplest stage of such an inspection is to review the data on the company in the Unified State Register, including checking whether it has the necessary KVEDs (types of economic activities) for you. But this approach will still be very superficial.

Our lawyers check all registration actions, which were carried out on a legal entity - to do this we need to get the information about the company from the archives of the Unified State Register of Legal Entities and analyze it. 

What will it give?

You will be able to see how the list of the company’s owners changed and how often it happened. Alarming “bell” is a change of ownership of the company shortly before your transaction (for example, six months or a year before the sale offer) and especially if the changes occurred after you began negotiating the purchase of the company.

This rule applies even to the resale of shares in the LLC from one member to another, about which you were not informed. We will trace all such “actions” within the company and analyze them for safety.

Checking the assets of the company for sale.

This inspection is needed just in the case if you want to buy an LLC because of the available assets. We check not only the LLC’s rights to the asset you are interested in, but also the "purity” of the origin of such ownership.

It is important to check the entire “history” of the asset, because you may encounter such a problem as the unscrupulous legalization of the unauthorized construction. In this case you will have to deal with the legal registration of the property, and it is far from certain that  you will be able to do this.

You also need to check the assets of the LLC for presence in the registers of mortgaged property. We conduct this inspection with the help of our trusted partner notary.

Checking for debts of the operating company or other liabilities.

As part of this inspection, we will check the owner selling you the corporate rights in the Unified Registry of Debtors. It is important to understand that if your future counterparty is not listed there, he may be included in the list of alimony defaulters, which will also be an obstacle to the sale of the company. 

Of course, a legal entity shall be checked for unclosed enforcement proceedings or lawsuits. To do this, you can use the Automated System of Enforcement Proceedings and the Register of Court Decisions. Here, it is also important not to stop at a superficial review, but to properly analyze the data obtained. Because there may be a situation where a legal entity has lost the case and the court consideration has already been closed, but the decision has not yet entered into force.

Please note! The company may have debts not only to counterparties, but also to state authorities, for example, arrears in payment of taxes. Our accountant will be able to audit the company company, if necessary.

Checking the ready-made company for the licenses and permits you need.

If the purpose of your purchase is to obtain a company with a ready-made license for further activities, you need to make sure that the license is not only obtained, but also valid. 

Moreover, you need to make sure that the LLC has no problems with the licensing authorities. We have encountered situations where an unscrupulous seller tried to sell corporate rights to a company that had already been under a licensing inspection, without notifying the buyer.

Such a purchase would lead to the fact that not knowing about the requirements of the licensing authority, the new owner would not take the necessary actions in time, and as a result would lose the license for which he paid.

Checking the reputation of the ready-made company.

Let’s say you purchase a company to participate in tenders. It is important to understand that by moving in certain areas of business, contractors know each other perfectly well and form their own opinion about the reliability of the market players.

If you want to continue to participate in the market independently, it is important that your new company has no “reputational” spots. Such data can be obtained either from the Internet or by making inquiries to the company’s previous counterparties.

Our lawyers also offer other types of pre-purchase company inspections, the list of which we can discuss at the introductory consultation.

You may also like: What To Consider When Buying A Ready-Made LLC In Ukraine?

Do you want to be confident in the safety of the transaction on the purchase of ready-made business in Ukraine? Don’t hesitate to contact us! We will conduct a pre-sale inspection of the company through all available to us channels and will ensure the safety of LLC purchase.

Still have questions?

Find more information on the procedure for buying a ready-made company here.

Find more information on the ready-made company pre-sale inspection procedure here.