- Due diligence looks for risks, needed approvals and change-of-control clauses before you commit.
- Most buy-side due diligence in Singapore is 'red flag': it reports material issues only.
- Legal, financial and tax reviews are usually done by different advisers in parallel.
- Public searches are run at the start and repeated just before signing and completion.
Why it matters
When you buy shares, the company comes with everything it has done in the past. Due diligence is how a buyer finds out about the company's legal and financial position, spots problems, identifies the regulatory approvals and third-party consents the deal will need, and settles how the deal should be structured.
Singapore law on whether a buyer can still claim for a problem it already knew about is not fully settled. So if due diligence turns something up, raise it before signing and deal with it directly, for example through a specific indemnity or a lower price.
How the process usually runs
A typical sequence looks like this:
- A confidentiality agreement, so the seller can share information.
- A term sheet or letter of intent, usually not binding except for points such as confidentiality, exclusivity, costs and governing law.
- Due diligence: the buyer's lawyers send a request list, the seller uploads documents to a (usually virtual) data room, and questions and interviews follow.
- A due diligence report, followed by negotiation of the sale agreement and the seller's disclosure letter.
What lawyers look at
The scope depends on the buyer's concerns, budget and timetable, but the legal review usually covers:
- Corporate records: who owns the shares, the constitution and the share capital.
- Licences and approvals, including limits on changes of control or foreign ownership.
- Key contracts with customers, suppliers and lenders, especially change-of-control and assignment restrictions.
- Assets, including property, leases and intellectual property, and whether the company actually owns them.
- Employees, incentive plans and compliance with work pass rules.
- Insurance, and current or threatened litigation.
Public searches
It is standard to search ACRA's records (which show charges, directors, shareholders and filed returns) as well as insolvency, litigation and intellectual property records. ACRA does not show who ultimately owns or controls a company, so the target's own register of registrable controllers should be checked too.
Issues that come up in Singapore
Singapore firms point to a few recurring problems: family businesses where a trademark or other intellectual property is held by a family member rather than the company, and gaps in compliance with foreign worker work pass rules.
Sharing employees' and customers' personal data in a data room is generally allowed without consent under the PDPA's exception for business asset transactions, subject to its conditions.
How long it takes
Firms describe a whole deal as taking anywhere from a few weeks to several months, and longer where regulators in several countries must approve it. Due diligence is a large part of that, so start early and have the seller's documents organised.
This article is general information on Singapore law and is not legal advice. Rules and agency policies change, and every situation is different. For advice on your own circumstances, speak with one of our lawyers.
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