Due diligence in a legal context means much more than simply verifying background information on a particular transaction. There is no widely accepted definition of the term. In the context of capital raising, the term takes its meaning from sections 731 and 733 of the Corporations Act 2001 (Cth) that provides for a due diligence defence against misstatements in, or omissions contained in a disclosure document where a person:
- made all inquiries (if any) that were reasonable in the circumstances; and
- after doing so, believed on reasonable grounds that the statement was not misleading or deceptive.
Due diligence programs
In Australia it is common to use a committee system to conduct due diligence investigations when issuing a disclosure document. Other investigations should also be considered as part of the overall due diligence program depending on the objectives of due diligence.
Designing effective and systematic due diligence programs is necessary for those responsible, if they want to avail themselves of a due diligence defence, in the event that the contents of a disclosure document is found to be misleading or deceptive or contains a material misstatement or omission.
Disclaimer
This page contains general commentary only about legal due diligence. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.
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- our Uncommon business acumen;
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Considering getting a lawyer to advise your business?
For a confidential, no obligation initial telephone call to find out how we can help your business gain an uncommon advantage in legal due diligence please phone our team on either 1300 386 529 or 07 3221 0013.

Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au

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Legislation
Recent insights about legal due diligence
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Top 11 legal tips when selling a technology business
These tips include asset sale or share sale, intellectual property ownership, legal and accounting due diligence, change of control issues, restraint of trade clauses, key personnel, and more.
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Readying employees and others for the due diligence process
This article explores the scope of initial due diligence, roles and responsibilities of an Advisory Team, considerations for retained employees, and the importance of project management in the acquisition process. Plus, a disclaimer and contact information for a legal practice director.
Recent Federal Court decisions regarding legal due diligence
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Cavar v Australian Unity Home Care Services Pty Ltd [2024] FCA 609
PRACTICE AND PROCEDURE – summary dismissal – where proceeding alleges substantially same case as earlier proceeding settled by deed of release – where deed of release contains binding promise not to pursue claims in this proceeding PRACTICE AND PROCEDURE – where applicant disrupted hearing of interlocutory application – where applicant left hearing during respondent’s submissions,…
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Gaha v Gaha [2024] FCA 531
CORPORATIONS – application by litigation representative for approval of deed of compromise – whether litigation representative is an ‘independent’ lawyer for purposes of r 9.71(2)(c) Federal Court Rules 2011 (Cth) – whether compromise in best interest of applicant – confidentiality orders Original article available at: https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2024/2024fca0531For more information, see the original judgement.