Conduct your due diligence

I am often bemused at clients who fail to conduct proper due diligence on international companies prior to doing business with them. When I say due diligence I don’t mean asking for a whole heap of financial information and documentation and trawling through boxes of it before making a decision but sometimes asking a few straight forward questions wouldn’t go astray.

For example, I was talking to a client the other day who was approached by a lady in Singapore (let’s call her Jane) who wanted my client (an interior designer who suppliers other interior designers with fabrics) to set up a showroom of her wares within Jane’s existing furniture showroom in Singapore.

Some of the simple questions I advised my client to ask were:

• Does Jane own the premises in Singapore and if not does she have a valid lease of the premises?
• Will Jane grant my client a sub-lease? If she doesn’t own the premises, will she need to get the landlord’s consent to the sub-lease?
• How long does she have a lease for?
• Will Jane contribute to the cost of establishing my client’s showroom?
• Who will man my client’s showroom? Will Jane act as an agent?
• Who has Jane acted as agent for in the past?
• What other products does she represent?
• How much of those products has Jane sold? Do those products match with my client’s products?
• How much of my client’s products does she think she could sell?
• Does Jane’s enterprise have the same values and branding appeal as my clients?

The reasoning behind the line of questioning is that before my client commits funds and effort to establishing a showroom in Singapore, she needs to be assured that she won’t be kicked off the premises, that she will actually sell products and that she will not be inadvertently ruining her reputation by entering into a business relationship with Jane.

We do this due diligence a lot when dealing with suppliers, agents and customers in Australia – why are we so shy when dealing with people internationally?

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Lynda Slavinskis is an outgoing, intuitive and commercially savvy lawyer. She has worked in-house at Sussan Corporation and Tattersall’s and now assists small and medium businesses with import, export, leases, franchising, employment and general business advice as principal solicitor of Lynda Slavinskis Lawyers & Consultants. Lynda is on the Victorian State Government’s Small Business Advisory Council.