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Legal audit / legal due diligence

Legal audit / legal due diligence in Poland

Legal audit (or legal due diligence) service consists in a comprehensive examination of the company’s legal position or specific assets which helps you to identify and eliminate the related legal risks.

Legal audit provides detailed information on the legal status of your company and whether the company’s procedures and documents comply with applicable legal regulations. It allows you to assess the compliance of your operations, profitability, risks taken by a business / legal entity or opportunities for growth. It also improves the safety of business operations.

What and when should be audited?

Due diligence is usually the preliminary step taken when intending to enter into an asset or share sale transaction, restructuring or streamlining the structure of a company, entry into the stock exchange or when taking up a function on the management board or supervisory board. Legal audit may also be conducted when there is an increased risk of the company’s inspection by state authorities. It allows you to ensure the transparency of the company’s activities and its bodies and to assess the profitability of actions taken and contracts concluded.

Scope of legal audit / legal due diligence

The scope of legal audit will be based on the organization’s needs, the specific issues of the industry in which the audited entity operates and who orders the examination.

A legal audit may be:

  • comprehensive i.e. covering a comprehensive analysis of the company or group of companies data in all its aspects
  • partial i.e. focused on specific areas, issues or time frames.

Here are examples of areas that may be subject to legal audit:

  • Examination and analysis of the founding documents of the company and submission by the company of basic documents to ensure compliance with commercial law (minutes of shareholders’ meetings), as well as documents determining the company’s organizational structure.
  • In-depth analysis of the ownership / capital structure and corporate matters (analysis of the Company’s Articles of Association, resolutions of the EGM and resolutions of the Management Board, internal regulations, registration documents), as well as the company’s compliance with registration obligations (already reported, awaiting notification), analysis of entries in the National Court Register.
  • Verification of the book of resolutions / book of minutes for accuracy or reliability of keeping the books.
  • Review and analysis of contracts and commercial agreements, including in the field of external financing or from the European Union funds, for correctness and risks arising from their terms and the implementing (internal) provisions to these contracts.
  • Verification of the existence or absence of basic documents determining the principles of functioning of individual departments of the company and their responsibilities (existence or absence of internal regulations or procedures).
  • Audit of contractual obligations and the existence of correct commercial agreements (preliminary examination of the manner of placing orders, the existence / or absence of cooperation agreements, agreements on purchase of goods or services, supply agreements, distribution agreements and possibly a distribution network agreements) in order to determine the compliance with law and unfair competition rules by removal of potentially prohibited clauses.
  • Audit of employment law contracts, their existence or absence, the applied employment policy and the type of contracts concluded.
  • Audit of employee policies, including verification of the application of the policy on counteracting mobbing, discrimination and harassment and procedures for reporting occurrences and irregularities.
  • Audit of protected intellectual and industrial property as well as property subject to protection, the existence or the lack and the possibility of registering product designations as trademarks, company names as trademarks and other industrial or intellectual property.
  • Audit of ownership structure in the field of real estate management, contracts and charges.
  • Analysis of the company’s liabilities, potential court disputes / administrative proceedings in which the audited entity participates.
  • Accounting / tax analysis.
  • Audit of personal data processing, in accordance with the GDPR.

Stages of legal audit / legal due diligence

Legal audit consists of several stages:

1. Gathering of documents

  • To be effective, this stage requires full cooperation on the part of all departments of the audited entity. Once a list of the required documents is ready, an audited entity should submit all identified documents for examination – in particular those potentially dangerous for the company. Because only a comprehensive assessment of a given issue will make the audit effective.

2. Analysis

  • In-depth analysis of the documents. 

3. Supervision

  • This part of the audit relates to the development and implementation of specific corrective procedures, reducing the risk of operations and drafting document templates to be implemented.

Only the accomplishment of the last stage and conducting regular control activities results in the appropriate reduction of the risk of violations of law and ensures that operations are adapted to the requirements of generally applicable law or those imposed by certification authorities / trading partners.

Legal audit – the biggest benefits

A properly conducted legal audit brings a lot of benefits and savings. It allows to:

Reduce the risk of paying administrative penalties and / or fines, civil damages or extra administrative fees

Avoid or minimize the risk of initiation of administrative or criminal proceedings by relevant authorities, including, for example, with relation to concessions, licenses, permits, financial activities or fulfilment of the related obligations or related to personal liability of members of the management board;

Remove the prohibited clauses from draft contracts with trading partners, which would expose the company to significant financial liability

Clarify the unclear provisions in contracts with trading partners or those provisions which due to their deficiency may result in the company’s liability for damages or the imposition of contractual penalties

Introduce framework agreements and improved provisions to agreements, including the articles of association – which are more favourable to the company than the generally applicable provisions of law, but are possible to be implemented

Register logotypes, industrial designs and patents strengthening the company’s position on the market and ensuring greater recognition

Securing copyrights and company’s rights, including trade secrets after the expiry of contracts with trading partners or employees

Prepare templates of HR, employee and corporate documents

Establish the necessary procedures and obtain certification, e.g. in the field of information security – ISO 27001

The benefits of a company’s legal audit significantly improve the comfort of running a business.

Legal audit / legal due diligence – find out how we can help!

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TGC Corporate Lawyers

ul. Hrubieszowska 2
01-209 Warszawa

+48 22 295 33 00

NIP: 525-22-71-480, KRS: 0000167447,
REGON: 01551820200000. Sąd Rejonowy dla Warszawy, XII Wydział Gospodarczy