Legal due diligence before buying a company: what is checked and what usually emerges

Buying a company means buying its history, including what no one volunteers in the data room. Legal due diligence examines that history before signing, while the price can still be reduced, risk allocated or the transaction abandoned. In practice, due diligence rarely stops a deal, but almost always changes its terms.

Corporate matters: who really owns the interest?

The first question is whether the seller owns what it claims to sell. The entire transfer chain from formation is checked. Each transfer required the form applicable at the time, or everything downstream may be challenged. Transfers from 17 August 2026 require a strict form.

Unofficial English translation:

An ownership interest transfer agreement must take the form of a notarial deed or an agreement authorised by a lawyer. An acquirer who is not already a shareholder must declare accession to the articles of association and any adopted statutes. The transferor guarantees payment of the contribution by the acquirer. — § 115(4) of Act No. 513/1991 Zb.

Statutory obstacles also apply: a person listed as a debtor in the register of enforcement authorisations cannot transfer or acquire an interest, and transfers cannot proceed during bankruptcy, restructuring or company dissolution (§ 115(3) and (6)). Both parties therefore require checks, not just the company. We also read every general meeting record approving a transfer and shareholder agreements under § 66c. Pre-emption rights, options and transfer restrictions appear in those documents, not the commercial register. See how to transfer an s.r.o. ownership interest for the process.

Contracts: clauses activated by a sale

Commercial contracts come next. The most common finding is change-of-control clauses: a key customer or bank may terminate when ownership changes, precisely what the transaction does. Other findings include exclusivity restricting growth, automatic renewal of unfavourable contracts, penalties and terms never accepted by the counterparty. The objective is to determine whether the business relationships motivating the purchase will survive the ownership change.

People: agreements and contractors

Employment review covers key personnel’s contracts, non-competes, unpaid entitlements and agreements outside employment. Self-employed collaborators deserve particular attention: if they function as employees, the buyer inherits reclassification risk and retrospective contributions. A related question, whether a contractor can receive equity instead of salary, is addressed in can a self-employed contractor receive an ownership interest?.

Assets, software and permits

For assets, title and encumbrances are checked. For intellectual property, we identify the registered trade mark owner and actual software rights holder. Typical findings are essential systems written by freelancers without rights agreements, or a domain and trade mark registered personally to the founder. The review also lists pending and threatened disputes, receivables including time-barred claims, and whether regulatory permits and licences survive the chosen structure.

Registers: RPVS and beneficial owners

If the target contracts with the state, due diligence checks the Register of Public Sector Partners entry and its currency. Not every contract triggers registration: in ordinary supply relationships, a recipient of a one-off contractual payment not exceeding EUR 100,000 is not a public sector partner; recurring or instalment payments trigger the status when their aggregate exceeds EUR 250,000 (§ 2(2) and (3) of Act No. 315/2016 Z. z.). The buyer must also be able to accurately register beneficial owners after the transaction. See who is a beneficial owner?.

Turning findings into contract terms

The report ranks findings by severity, each with a place in the transaction documents. Remediable defects become conditions precedent: signed amendments, missing consents and corrected registers before price release. Remaining risks are covered by seller representations and warranties with agreed remedies, or a specific indemnity for an identified risk. Part of the price is often held in escrow to meet crystallised risks; see lawyer escrow in company sales. Major findings change the price itself.

How we help

We review for buyers and sellers preparing ahead of the other side’s findings. We deliver legal due diligence proportionate to the transaction, guide the full company sale or purchase or larger acquisition or merger, and use findings to support investor entry terms.