Due diligence definition
What is the definition of "due diligence"?
Due diligence is the investigation process that is used in negotiations to verify and uncover information to assist in making a decision. Due diligence is commonly used in anticipation of the purchase of a business, real estate or the extension of credit. Due diligence steps may include, but are not limited to:
- Verifying representations made
- Evaluate risks
- Confirm the financial elements, such as inventory, receivables, payables, etc.
- Ensure compliance with all laws and regulations
In the purchase of a business, the due diligence process can take months, but should not be rushed at the expense of accurate discovery.
Due diligence may also relate to a legal obligation of a party meaning that they have to perform an act with a certain standard of care (the effort by an ordinarily prudent or reasonable party to avoid harm to anther party or the application of every reasonable precaution to avoid harm).
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