Due Diligence of Russian Contracting Party

Russian corporate lawyers are sometimes especially concerned about a due diligence investigation of the other party to the contract requesting heaps of documents from it: the Articles of Association, extract from the register of legal entities, etc.

In European countries such investigation is referred to as due diligence ("due circumspection"). It is generally performed for making a decision on acquisition of a new business. The similar investigation of the future contracting party is performed quite rarely. The reason for this is that contractual relationships in the West tend to be built on trust to the partner. It is assumed that the contracting party acts honestly, as it is known well that "reputation comes first".

Legislation in another country is different (sometimes quite substantially); it is important to know certain procedural aspects and to understand the practices. Due to this, we would recommend a foreign business person to entrust a law firm located in Russia with due diligence inspection of the Russian contracting party.

Then the customer will be able to receive explicit answers to important questions: 

- whether this company is legally incorporated; 

- whether it goes through bankruptcy or liquidation; 

- who its owners and managers are; 

- how long this legal entity has been on the market, etc. 

You can't but agree that such information can be essential for making a decision whether it is feasible to enter into a million-euro contract with the subject entrepreneur.