Due diligence

Due diligence in general lending transactions

The due diligence process allows the lenders to ascertain information about the borrower relevant to the borrower’s ability to repay the loan.

In a typical lending transaction, it will be necessary for the lawyers acting for any lenders to review the constitutional documents of not only the borrower, but also any guarantor and any other party providing security for the transaction (third party security provider).

A large number of the checks that the lawyers will need to carry out will relate to whether the company and directors have the necessary capacity and authority to enter into the transaction (see Practice Note: Dealing with companies in a finance transaction—investigating capacity and authority). For more information on the checks to be carried out by the lender’s lawyers, see: Reviewing constitutional documents of a corporate borrower—checklist.

In addition, as part of the pre-completion and due diligence process, lawyers acting for a lender in a typical financial transaction will need to review the board