Legal Due Diligence

COREDO specialists review the incorporation documents, history of changes in the ownership structure, shareholder agreements, and internal company regulations. Compliance of the corporate structure with the requirements of the regulator in the country where the company operates is verified.

The core area of review is the validity and scope of regulatory authorisations. The current status of the licence, the history of interaction with the regulator, and the presence of any open orders or restrictions are analysed. Qualification requirements for directors and beneficial owners of the company are verified. We check the licence status against public registers: in the EU, against the registers of national regulators and the central register of the EBA. Outside the EU, these include, for example, the MAS Financial Institutions Directory in Singapore, the VARA register of licensees in Dubai or the FINTRAC MSB registry in Canada. For Singapore licensees, we check whether controllers and directors meet the MAS fit and proper criteria. We also determine which regime applies to the target company and whether the regulator must be notified of the transaction in advance. For a CASP, and as a general rule for an EMI, even acquiring a qualifying holding requires notification, as does its later increase to 20%, 30% or 50% or making the company a subsidiary. For a payment institution, PSD2 links notification to reaching these thresholds or subsidiary status.

The state of the anti-money laundering system is one of the key risks when acquiring a financial company. Weak AML practices at the target company typically cost more than any discount on the transaction. COREDO assesses AML/CFT policies, client identification procedures, SAR logs, and documentation quality.

Key contracts are analysed: bank accounts and relationships with partner banks, client agreements, technology provider agreements, and agency agreements. Encumbrances, rights to unilateral termination, breaches, and hidden obligations are identified.

The presence of open court cases, administrative proceedings, and regulatory investigations — both ongoing and concluded within the past three years — is verified.

In legal due diligence, financial statements, capital requirements and their compliance with regulatory standards, tax history, and potential liabilities are reviewed. For example, the initial capital of an EMI under EMD2 is at least EUR 350,000, and that of a payment institution under PSD2 ranges from EUR 20,000 to EUR 125,000 depending on its services. This is the minimum initial capital, not the cost of a licence or a transaction; we check compliance with the current own funds requirements separately.