Due diligence as required by secretarial standards issued by ICSI

Due diligence, as required by Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI), refers to the comprehensive and careful examination of various aspects of a company’s operations, financials, legal compliance, and other relevant matters. The purpose of due diligence is to ensure that accurate and reliable information is provided to stakeholders, particularly during significant corporate transactions or events. Secretarial Standards aim to promote transparency, accountability, and good governance within companies.

In the context of Secretarial Standards issued by ICSI, due diligence typically involves the following aspects:

Financial Due Diligence: This involves a thorough review of the company’s financial statements, accounting practices, and internal controls to assess the accuracy and reliability of financial information. It helps identify potential risks and discrepancies that may impact stakeholders.

Legal Due Diligence: Legal due diligence involves a detailed examination of the company’s legal documents, contracts, agreements, licenses, permits, and compliance with applicable laws and regulations. It ensures that the company is not exposed to legal liabilities and that all legal obligations are being met.

Compliance Due Diligence: This aspect focuses on evaluating the company’s compliance with various regulatory requirements, including company laws, labor laws, environmental regulations, and industry-specific regulations. It helps identify any instances of non-compliance and suggests corrective measures.

Operational Due Diligence: Operational due diligence assesses the company’s operational processes, systems, and practices to identify inefficiencies, gaps, and areas for improvement. It helps ensure that the company’s operations are streamlined and optimized.

Commercial Due Diligence: Commercial due diligence involves evaluating the company’s market position, competitive landscape, customer base, and growth prospects. It helps stakeholders understand the company’s market dynamics and potential for future success.

Information Technology Due Diligence: In the digital age, IT due diligence examines the company’s IT infrastructure, systems, cybersecurity measures, and data protection practices. It ensures the security and reliability of IT systems and data.

Human Resources Due Diligence: This aspect assesses the company’s human resources policies, employee contracts, compensation practices, and overall workforce management. It helps identify any HR-related issues that need to be addressed.

Due diligence is typically conducted during significant corporate events such as mergers and acquisitions, joint ventures, investments, restructuring, and other transactions. The goal is to provide accurate and complete information to all relevant parties, enabling them to make informed decisions and mitigate potential risks.

It’s important to note that the specific requirements and procedures for due diligence may vary based on the nature of the transaction and the applicable Secretarial Standards. It’s advisable to consult with qualified professionals and legal experts to ensure compliance with the relevant standards and regulations.