What to review in a due diligence before buying a company in Colombia

An acquisition is won or lost on information. Before signing, the buyer needs to know what it is buying: not only the assets and revenue, but also the hidden liabilities that may surface after closing.

The most common contingencies

1. Tax: unfiled returns, withholdings not applied and differences between the books and the income tax returns.
2. Employment: service contracts that are in fact employment relationships, incomplete social security contributions and verbal arrangements with key employees.
3. Corporate: unsigned minutes, outdated registers and unregistered shareholder agreements.
4. Contractual: change-of-control clauses that let customers or suppliers terminate the contract upon the sale.

How they translate into the contract

Each finding is quantified and taken to the share purchase agreement as a price adjustment, an escrow holdback or a specific representation and warranty from the seller. A due diligence that does not end in concrete clauses does not protect the buyer.

This article is for information only and does not constitute legal advice. Contact us about your specific case.