Write short notes on the following: (i) Scope of legal due diligence.

The scope of legal due diligence depends on the purpose and objectives which may vary from case to case. The scope of due diligence by a large institutional investor will vary from the scope of due diligence by the company which proposes to acquire a target company. Thus it is not possible to define the scope of due diligence specifically. However, certain mandatory issues that should be covered in any type of legal due diligence are as follows: Regulatory compliance - It would include compliance requirements of the company under various applicable laws such as Companies Act, Income Tax Act, SEBI Act rules and regulations, employee related laws, other business related laws such as pollution control laws, patent laws, and applicable laws in the country where the target company is situated. Contractual compliance - It would include the compliance by the company under various material contracts by the company with suppliers, customers, employees etc. and to verify whether the company has complied with the terms and conditions of different contracts. Compliance under intra-corporate aspects - It would include the compliance by the company under the intra company documents such as Memorandum and Articles of Association, Corporate policies, procedures, code of conduct etc. Financial aspects - It includes thorough reading of the balance sheet to identify the financial obligations of the company, penalties paid for violations of laws in the past etc. Non-financial aspects - It includes analysis/examination of aspects such as reputation and goodwill of the company. Cultural aspects - Especially in case of cross border transactions, compatibility and adaptability of corporate cultures are to be analysed to eliminate the problems that may arise out of cultural differences