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Due Diligence under Companies Act, 2013 and FEMA Regulations

August 12, 2020

About the client:

Due Diligence is generally performed before a Company goes through any Private Equity investment or Change in the Management or Funding from Bank or Financial Institutions. R&A Associates has been conducting Due Diligence of companies based on the specific purpose. In the present case, R&A conducted Due Diligence for a Company which has been in existence for over two years. The company is primarily a pharmaceutical company in India which is engaged in the business of manufacturing active pharma ingredients.

Our Association and work- We had been approached by the client for undertaking Due Diligence under Companies Act, 2013 and FEMA regulation as there was a proposed change in management of the Company. The process of due diligence involves deep dive review of the company’s records to assess the status of compliance and identify the gaps.  The series of activities involved in the process are enumerated below:

  1. Preparation of a complete checklist of information required from the Company starting from its Organization Structure, Charter documents, Secretarial records, Financial Statements and Annual Reports, Management and Shareholding details, Information relating to related party transactions, various agreements which the Company has entered into during the ordinary course of its business, borrowing status, loan agreements, shareholders’ agreement, pending investigations/applications, Foreign Direct Investment (FDI) or Overseas Direct Investments (ODI) if any ,
  2. Signing of a Non-Disclosure Agreement with the client for carrying on due diligence as per their confidentiality requirements.
  3. Complete verification of documents shared by the client and seeking information wherever required.
  4. Identification of non-compliances or gaps which have to be brought to the notice of client along with the corrective measures and the implications.
  5. Submission of a detailed Due Diligence Report with observations and assisting them in making good the non-compliance/gaps.
  6. Advising on the steps to be taken for compounding of offence under Companies Act and FEMA, if any and undertaking the process of compounding before the regulatory authorities.
  7. Advising them on the good governance practices and future course of action in maintenance of records as per Companies Act, 2013 and Secretarial Standards issued by ICSI.
  8. Issuance of final signed Due Diligence Report to the Company.

Our extensive experience of undertaking Due Diligence for various companies has given us considerable exposure of the critical aspects to be looked into in the process.  Due Diligence is time-consuming, tedious and sometimes an expensive process and so it shall be essential to hire an experienced team who can ensure that the entire process is completed smoothly within the committed timelines.

R&A Associates has assisted clients engaged in Management Consultancy services, Advisory Services and Construction businesses.

Do write to us in case you want to know more at [email protected]

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