Monday, January 2, 2012

Electronic Legal Due Diligence In India

Legal due diligence in India is not a new concept. Legal due diligence involves assessing the suitability, efficiency and viability of a company or organisation. Legal due diligence may be required to meet statutory and regulatory requirements or it may be necessary when a company wishes to invest in another company.

A contemporary form of legal due diligence, especially for companies and individuals engaged in information and communication technology (ICT) related services, is known as cyber due diligence. Cyber law due diligence in India has become mandatory due to the stringent nature of cyber law of India. In fact, cyber due diligence for companies in India and cyber due diligence for banks in India has already been prescribed. Similarly, cyber security due diligence in India is also becoming a must to have requirement.

Securities and Exchange Board of India (SEBI) is planning to use electronic initial public offer (IPO) in India. Foreign investments in pharmaceutical in India has been liberalised by Reserve Bank of India. Similarly, foreign direct investment (FDI) in India has also been liberalised in many crucial areas. Naturally, lots of investments, IPOs, private equity funds exchange and many more collaborative and cooperative activities would take place in India in the year 2012.

These developments would also make legal due diligence necessary. However, the traditional legal due diligence procedure relies heavily upon paper based documents and transaction. A better option is to engage in electronic legal due diligence in India (e-legal due diligence in India). The e-legal due diligence in India is cost effective, timely and efficient. It also can provide the best possible results for legal due diligence purposes.

Even legal frameworks are in the process of being established to accommodate these contemporary changes. For instance, the electronic delivery of services bill 2011 (EDS Bill 2011) has been proposed by Indian government that would make electronic delivery of services in India an acceptable norm.

Similarly, existing legal frameworks also facilitates digital preservation in India, e-governance, e-commerce, etc that would also require e-legal due diligence in India. The public records keeping framework of India requires keeping of public records that very few organisations in India are doing. Of course, public records keeping framework of RBI is an exception in this regard. Public records are also required to be maintained by the information technology act 2000 and right to information act 2005 of India.

All these requirements of public records keeping and e-legal due diligence in India can be managed by establishing virtual data rooms (VDRs). Many leading companies are already using VDRs to ensure legal due diligence in a smooth and efficient manner. With VDRs thousands of pages of content can be made available in just 24hrs or less. VDRs provide a secure and highly efficient method for sharing critical business information for electronic due diligence in merger and acquisition (M&A) advisory, IPO and secondary offerings, asset purchases, venture capital due diligence, bio tech licensing, commercial and corporate real estate ventures, financial restructuring, preparing for exit strategies, and many other transactions that require large amounts of document sharing.

Further, e-legal due diligence in India would also ensure that electronic discovery (e-discovery) requirements in India are duly met whenever needed. E-discovery services in India would be required in near future in India and e-legal due diligence can greatly facilitate the same. Individuals and companies must start exploring using e-legal due diligence as soon as possible for greater benefits of their own.