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Due diligence in a developing market

As a preliminary step for anyone wanting to do business in a developing market, extensive due diligence is an absolute must.

Your due diligence should cover not just the business climate, the economic drivers, and the competition you could face in the new market, but also confirmation that your planned business is permitted in the new market, the applicable regulations for setting up your new business, whether you will need a local partner, the business and legal structures you would be permitted to adopt, and how all this interfaces or will interface with any other business activities you may have elsewhere in the world. For example, in Indonesia, the relevant governmental ministry routinely publishes and updates what is colloquially called a ‘negative list’, containing the industry sectors and business activities which are then prohibited to foreign direct investment.

It is highly advisable to prepare a checklist of due diligence actions and documentary review, and the contents of that checklist will vary depending on the area and scope of your due diligence, as well as the type of transaction you are contemplating.

So, a due diligence checklist for the acquisition of shares in an existing overseas entity will be different from a checklist for the purchase of land, or of movable assets.

Subsequent blogs on this site will provide the reader with detail as to the possible contents of a due diligence checklist, and the due diligence steps which may be necessary, and specific advisory with regard to particular markets.

This blog is for information purposes only. It is not intended to provide legal advice.

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