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Due diligence can be a legal obligation, but the term more commonly applies to voluntary investigations. It may also offer a defence against legal action. A common example of due diligence is the process through which a potential acquirer evaluates a target company or its assets in advance of a merger or acquisition. [1]
Countries can base their corporate liability systems in criminal or non-criminal law (that is, administrative or civil law) or in both. They can also enact legislation that creates liability for legal persons in specific areas of law (e.g. covering health and safety, and product safety issues).
The parent subsidiary company relationship is defined by Part 1, Section 5, Subsection 1 of the Companies Act, which states: [8] 5.—(1) For the purposes of this Act, a corporation shall, subject to subsection (3), be deemed to be a subsidiary of another corporation, if —
During the Overend Gurney crisis (1866–1867) and the Long Depression (1873–1896) many companies fell into insolvency and the unpaid portion of the shares fell due. Further, the extent to which small and medium investors were excluded from the market was admitted and, from the 1880s onwards, shares were more commonly fully paid.
Muddy Waters Research LLC is an American privately held due diligence based investment firm that conducts investigative research on public companies while also taking investment positions that reflect their research. [1]
Under statutory law, an auditor can be held civilly or criminally liable. [3] Due to the risk of liability, CPAs and accounting firms may carry professional liability insurance to provide some protection from legal claims and lawsuits, although some firms choose to self-insure. [4]
Corporations exist in part to shield the personal assets of shareholders from personal liability for the debts or actions of a corporation. Unlike a general partnership or sole proprietorship in which the owner could be held responsible for all the debts of the company, a corporation traditionally limited the personal liability of the shareholders.
A subsidiary may itself have subsidiaries, and these, in turn, may have subsidiaries of their own. A parent and all its subsidiaries together are called a corporate , although this term can also apply to cooperating companies and their subsidiaries with varying degrees of shared ownership.