Legal Literacy – Legal due diligence (LDD) is an important aspect in the business world. Companies need to understand matters related to risk management to help make more appropriate and effective decisions, be protected from legal problems, and achieve business goals safely and maximally.

One way to achieve these things is by carrying out LDD. This article discusses in depth the concept of legal due diligence starting from the definition, objectives, types, stages, to its urgency in the business law world.

Term legal due diligence comes from the root word diligence which in Latin is divided into two meanings, namely diligentia quam suis rebus and diligentia exactissima/diligentia boni patrisfamilia.

In English, both are defined as the care that and ordinary person exercise in managing his or her own affairs and a more exacting type of care exercised by the head of a family.

Black’s Law Dictionary defines due diligence as

“...the diligence reasonably expected from, and ordinarily exercised by, a person who seeks to satisfy a legal requirement or to discharge an obligation”

Referring to the opinion of Faizal Kurniawan, a lecturer at the Faculty of Law, Universitas Airlangga, the term legal due diligence (LDD) is defined as an examination activity carried out carefully by a legal consultant on a company or transaction object. This aims to obtain material information or facts that can provide an overview of the company's condition.

The examination in LDD is carried out thoroughly to achieve objective, systematic, and logical verification in accordance with applicable law.

The LDD process includes examining various legal aspects related to the company's business. In this case, there are several main elements in LDD, namely, examination of legal documents, such as reviewing agreements, contracts, permits, and licenses.

LDD can only be carried out by a Capital Market Legal Consultant (KHPM) before determining a legal opinion or legal opinion.

Not only that, LDD also includes checks related to IPR (Intellectual Property Rights), starting from copyrights, trademarks, company patents, to identifying potential problems related to IPR.

Meanwhile, from a financial perspective, the existence of LDD is necessary to evaluate the company's financial condition, namely identifying problems that could potentially impact transactions and business operations.

As for employment, LDD is needed to examine various aspects, such as employment contracts, compensation, and problems related to employees.

Finally, in the field of licensing and/or legal compliance, the LDD process is aimed at examining a company's licensing and compliance with applicable regulations, be it environmental regulations or industry regulations.