Before you Invest - 5 (Legal Documents)

Important things!

In previous articles

In previous articles, we have explained the importance of being assured of the transparency and competence of the executive and financial managers of the company you want to invest in, as well as knowing the business model, financial statements, and the chartered accountant.

In addition, you should review the legal papers of the business in which you want to invest, and, accordingly, determine the partnership guarantees.

Without going into technical complications, the most important papers can be limited to the following items:

1- Memorandum of association and the articles association including amendments

The company’s articles of association including subsequent amendments state the actual owners of the company, the share and the administrative role of each one of them in addition to the amendments that occurred in their shares and roles, if any. It also explains the activities that the company is entitled to practice within the framework of its articles of association. The articles of association including amendments do also clarify the rights and powers of the company’s shareholders, and the liquidation procedures when liquidation is needed.

If you are going to be a partner in a business, you should ensure that you are mentioned in the company's articles of amendment, even if you would not have a managerial or an administrative role in the business.

2- Commercial register of the business

The commercial register of the business explains its history in terms of its origination, expansion, raising its capital, and the activities that it is licensed to conduct, and most importantly, it shows the executive and financial managers of the activity.

If you are going to become a partner with administrative rights in the business, you should ensure that you are mentioned in the commercial register with the agreed upon rights.

3- Tax card and insurance file

The tax card and insurance file should be available in the legal documents of the business to ensure it is running legally and officially, otherwise the business may be subject to seizure and litigation.

4- The company's tax and insurance status

It is highly preferable to obtain a recent certificate from the company's certified public accountant stating that the company submits its tax and social insurance returns on a regular basis. This ensures that the business is running smoothly and legally, which reduces the risk of seizure and litigation.

It is highly recommendable, of course, to seek the help of legal consultants and chartered accountants when you are thinking of buying a business or becoming a partner in it. Although this may increase the cost to some extent, it ensures that the partnership or investment is less prone to obvious defects or significant risks.

Before you Invest - 4 (Certified Public Accountant)
Ensure the accuracy of financial statements!