Knowing how to look at the actual documents and numbers of a company or business for sale is not a skill, it is a process of great importance to take care of your investment, and it is called: Due Diligence.

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Due Diligence is the set of investigative actions and exhaustive analysis made by the potential buyer of a company to its financial operation and legal status to know if everything is in order and if it will be profitable or not to invest money in it. 

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Many Latinos in Canada are excited about the idea of expanding their economic horizons by investing in a business, but not everyone is aware of this crucial step that helps avoid risks associated with the transaction.

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How does due diligence work and why is it so important before investing? Find out today in our blog. Read with me to the end so you can avoid unpleasant surprises that can damage your potential investment. Let's get started!

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Investing without risk

Before investing in the Canadian market, Latinos should understand the business landscape they are entering because, just as there are many good business opportunities, there is also the possibility of hidden conflicts surrounding the company they decide to buy or the new investment they want to make. 

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How does due diligence work?

Due diligence identifies potential risks prior to any transaction, verifies documents, reviews legal, financial and operational aspects that may impact the acquired business. This process is iterative, meaning that the steps are not performed only once, but are repeated continuously, allowing the company to adapt to new risks, update its analysis with recent information and improve its policies and practices on an ongoing basis.

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In 5 summarized steps, due diligence comprises:

1. Establish its purpose, whether to evaluate a supplier, conduct a merger or acquisition, or comply with specific regulations of provincial laws.

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2. Obtain financial, legal and reputational documents, as well as regulatory compliance analysis. 

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3. Analyze financial, legal, operational and reputational risks. This may include aspects such as money laundering and data privacy.

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4. Corroborate data obtained through independent audits and official sources that guarantee authenticity.

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5. Write the report, including key findings, risk analysis, recommendations and a final assessment of the viability of the business relationship or investment.

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Canada is a member of the Organisation for Economic Co-operation and Development (OECD), and according to the OECD Guide to the OECD , Canada is a member of the Organization for Economic Co-operation and Development (OECD). OECD DUE DILIGENCE GUIDANCE Due Diligence Guidance for Responsible Business Conduct, this process includes:

1. Incorporate responsible business conduct (REC) into management policies and systems.
2. Analyze how the company's activities, products or services can generate negative impacts on human rights, environment, among others.
3. Halt, prevent and mitigate negative impacts with measures that avoid or reduce the negative impacts identified.
4. Follow up on implementation and results by monitoring actions taken to ensure their effectiveness and adjust strategies as needed.
5. Communicate in a transparent manner the actions carried out and the results obtained to stakeholders.
6. Repair or assist in the repair of impacts when appropriate.

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Benefits of Due Diligence for Latino Entrepreneurs

Latino entrepreneurs in Canada have the opportunity to excel in their field if they have the right tools. In this sense, due diligence allows them to:

• Avoid legal surprises.
• Optimize your resources. 
• Build a foundation of trust in the market. 
• To integrate into the business world in an effective way.

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The importance of legal advice

Once the due diligence report has been obtained, it is important that the members of the company make decisions based on the results and determine whether or not to continue, renegotiate or discard the relationship. In addition, it is crucial to implement periodic follow-up checks.

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Legal advice ensures that the due diligence process is complete and protects the investment. In this regard, Immiland Law provides the necessary support for Latino entrepreneurs to enter the Canadian market in a safe and professional manner.

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Doing Due Diligence with Immiland Law

Adapting to the Canadian market is not only a matter of efforts and sacrifices, it also requires strategies to assess the legal and financial health of potential businesses. Do you want to protect your investment and succeed as an entrepreneur in Canada? Discover the business legal services we offer, click here!

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Our team of lawyers is highly qualified to advise you at all stages of your business lifecycle. From incorporation, due diligence, commercial dispute resolution and more. 

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I hope this topic will be useful and enlighten you before investing in a new business or company. If you have any doubts, please contact us.

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Thanks for reading, see you in the next blog!

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With love, 

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Immiland Law