By Dr. Benjamín Gutiérrez | Managing Partner of BGA Abogados
You can negotiate a good price and discover, after committing your investment, that an essential contract requires authorization to continue, that relevant labor contingencies exist, or that the selected land presents restrictions for the project you wish to develop. Those findings can change the true cost of the operation and the conditions under which it is convenient to proceed.
Due diligence in Costa Rica allows you to investigate these aspects and document them before making decisions that are difficult to reverse. Its usefulness is appreciated in concrete questions: what you are acquiring, what information is missing, what risks you can assume, and what conditions you need to negotiate to protect your interests.
At BGA Abogados, we approach due diligence from a legal and contractual perspective, taking into account the particularities of the business and coordinating the participation of the specialists required by the contracted scope. The doctoral research of our managing partner, titled “The Due Diligence Contract: Its True Legal Nature,” specifically develops the autonomy of this engagement and the responsibilities arising from its execution.
If you are evaluating a purchase, an investment, or the sale of your company, you can request a due diligence proposal that defines the areas of review, the deliverables, and the corresponding fees.
Request Due Diligence proposal
What due diligence is and what decisions it allows you to make
Due diligence consists of a professional investigation aimed at understanding the situation of a company, an asset, a project, or a counterparty, according to previously defined objectives. It can cover legal, financial, tax, labor, commercial, technological, environmental, and technical aspects, depending on the nature of the engagement.
The work must produce useful information for decision-making. A finding may justify an additional request for documents, a price modification, a closing condition, or a recommendation not to proceed. It can also confirm favorable aspects and allow the client to move forward with a better understanding of the commitments being assumed.
The depth of the analysis depends on the transaction. The acquisition of shares in a company requires reviewing different aspects than those of interest to someone acquiring land to build. Identifying those differences at the beginning allows the work to focus on the matters that could affect the client’s decision.
The due diligence contract has its own object
Dr. Benjamín Gutiérrez’s doctoral thesis holds that due diligence must be understood as an autonomous, principal, and innominate contract. Its object consists of conducting a specialized investigation and delivering a technical report, with its own obligations and responsibilities between the client and the contracted professional or team.
This perspective has a practical consequence: the engagement can exist and be fulfilled even if the purchase, sale, or investment that motivated the analysis does not ultimately take place. An entrepreneur can contract it to prepare for a future sale; an investor can request it before formulating an offer; and a corporate group can agree on successive reviews through a framework contract.
The contract must identify who assumes the professional obligations and who is responsible for each area. The term “multidisciplinary team” describes a way of working; it is convenient to specify which persons or entities are part of the engagement, how they coordinate, and what services correspond to them.
In Costa Rica, Articles 1022 and 1023 of the Civil Code establish general rules on the binding force of contracts and the consequences arising from their content and nature. The specific qualification of due diligence developed here corresponds to the doctrine proposed in the thesis.
When it is advisable to contract it
The right moment depends on the commitments being negotiated. It is advisable to define the investigation and its conditions before assuming obligations that restrict the possibility of changing the price, requesting corrections, or withdrawing. When there are letters of intent, reservations, purchase options, or other documents, it is necessary to review what effects they have and how they relate to the results of the study.
Anyone buying shares or stakes needs to understand the situation of the company whose capital they intend to acquire. Anyone buying assets must establish which rights, contracts, permits, and obligations are linked to them. The chosen legal structure influences the analysis and requires a specific review.
It is also useful for anyone preparing their company for sale, seeking new investors, or evaluating an expansion. The scope can focus on a specific contingency or encompass several areas of the business. The decision is made based on the goal and the available information.
What is reviewed when buying a company
The corporate investigation may include share ownership, corporate books, representation powers, shareholder agreements, and restrictions relevant to the operation. It is necessary to cross-check the offered structure with the supporting documentation.
In contractual matters, it is crucial to know what the continuity of the business depends on. Leases, financing, licenses, and contracts with clients and suppliers may contain conditions regarding assignment, change of control, expiration, or termination. The effect of each clause must be analyzed in relation to the intended transaction.
The labor review may examine hiring methods, compensation, benefits, work schedules, social security, insurance, litigation, and other commitments related to personnel. The goal is to identify contingencies and matters that must be resolved or budgeted according to the agreed scope.
Permits, tax obligations, intellectual property, and litigation require attention depending on the business activity. When the investigation encompasses financial statements, valuations, IT systems, or technical conditions, competent specialists in those areas must intervene, with defined responsibilities and deliverables.
An operation in the educational sector, for example, may require particular attention to operating authorizations, facility usage, labor relations, and educational contracts. Sectoral experience helps formulate questions that a generic checklist might overlook.
What is reviewed before acquiring real estate
Real estate due diligence must consider both the legal status of the property and the buyer’s intended use. Registry information constitutes a relevant source that must be cross-referenced, as appropriate, with surveys, access, occupancy, leases, liens, restrictions, municipal conditions, and project documentation.
On land intended for construction, it is important to investigate the compatibility of the intended use and the requirements or limitations that may affect it. In a condominium, it is convenient to know the bylaws, fees, and relevant agreements. Technical, environmental, utility availability, or valuation verifications are defined with the corresponding professionals when they form part of the engagement.
The scope of a notary review and that of a due diligence must be expressly identified. Thus, the client knows which verifications are included, which ones require additional study, and what information will remain pending before closing.
The seller can also contract a due diligence
Vendor due diligence is the investigation commissioned by someone intending to sell a company or business. It allows for organizing documentation, detecting contingencies, and working on their correction before presenting the business to prospective buyers. The thesis analyzes it as a concrete manifestation of the autonomy of the professional engagement.
For the seller, it can be useful to know in advance about a contractual expiration, a corporate inconsistency, or incomplete labor documentation. Correcting these matters in time can reduce obstacles during negotiation and facilitate well-founded answers to inquiries from interested parties.
If the report is shared with third parties, the conditions of access, confidentiality, use, and eventual reliance on its conclusions must be defined. The buyer must evaluate whether its scope meets their own objectives and what additional investigations they require.
How the investigation is organized
The first step is to understand the operation and the client’s expectations. Based on that information, the object of the contract, areas of analysis, responsible parties, sources, expected timeline, and report delivery conditions are defined. It is also determined how requests for expansion or changes in the operation will be handled.
Next, an information checklist tailored to the engagement is prepared. Documents can be organized in an access-controlled repository, known as a data room, with rules for consultation, custody, and traceability. Access to third-party information requires the corresponding authorizations and conditions.
The review should allow for asking questions, cross-checking data, and requesting clarifications. Technical visits, interviews, or external consultations are incorporated when the scope and circumstances require them. A received document does not by itself equal a fully verified fact: the report must reflect the verifications conducted and their limits.
If a contingency appears that could decisively affect the transaction, it is advisable to communicate it promptly. A critical risk may justify a deeper review, the suspension of a stage, or a recommendation on the conditions necessary to continue.
What the client should receive
The final report is the primary deliverable of the due diligence contract. The thesis highlights that it must state the findings, their consequences, recommendations, and the limitations of the investigation, supported by documentary evidence that allows understanding how the conclusions were reached.
A useful report must identify what was reviewed, with what sources, and up to what date. It must distinguish verified facts from pending matters, explain the relevance of contingencies, and point out recommended measures to adopt. When economic estimates are included, their foundation and any uncertainties that could affect them must be indicated.
Incomplete information must remain identified. If it was not possible to access an essential contract or confirm a permit, the client needs to know so they can decide whether to demand that verification before closing. The absence of documents should not be presented as an absence of risk.
The report may be accompanied by an executive contingency matrix and an explanatory meeting, depending on what was contracted. Recommendations should be understandable to business decision-makers and precise enough for their advisors to incorporate into negotiations.
How findings translate into negotiation conditions
Consider these hypothetical examples. If a relevant contract requires consent for an assignment or a change of control, it may be necessary to negotiate obtaining it prior to closing. If a contingency requires correction, the parties can discuss who will execute it, within what timeframe, and how fulfillment will be demonstrated.
When a risk allows for a reasonable estimate, its impact on the price or negotiated guarantees can be analyzed. In other situations, it is worth evaluating holdbacks, deferred payments, escrow mechanisms, or indemnity commitments. The relevance and effectiveness of each alternative depend on the contracts and the applicable legal framework.
The following matrix shows hypothetical examples of how to relate a finding to a concrete action.
|
Hypothetical finding |
Possible consequence | Action to consider |
|
|
|
|
|
|
|
|
|
A serious finding may also lead to a recommendation not to proceed. That technical recommendation must be examined alongside commitments already assumed: receiving an unfavorable report does not automatically grant the right to terminate any contract or recover any payment.
The business decision belongs to the client, based on the results of the study and pertinent advice. The value of due diligence remains in helping avoid an operation incompatible with their objectives or with the level of risk they are willing to assume.
Permanent due diligence for recurring decisions
Companies analyzing multiple investments or acquisitions can organize the service through a framework agreement. The thesis develops this modality as permanent contractual due diligence, under an ongoing professional relationship and successive engagements with a defined object.
This model allows agreeing on common rules for confidentiality, coordination, and delivery of results. Each review must retain an identifiable scope, responsible parties, and its own or determinable economic conditions. Its utility is especially relevant when the client evaluates transactions across different business units, sectors, or jurisdictions.
Cost, duration, and professional liability
Fees and timelines depend on the number of companies or assets, documentation, areas of review, jurisdictions, specialists, and availability of information. A clear proposal must explain what is included, what the team will deliver, what assumptions exist, and how expansions will be managed.
In his research, Dr. Gutiérrez analyzes due diligence as an obligation of means. This requires performing the work with the corresponding professional diligence and fulfilling agreed-upon obligations, including the delivery of the report. The investigation cannot promise profitability or the complete absence of contingencies.
The precision of the engagement protects the client and allows for assessing the team’s performance. Investigatory duties, confidentiality, communications, and conditions of report use must be defined. Liability for a breach is analyzed according to the facts, what was contracted, and the applicable legal framework.
Doctoral background applied to investment decisions
Dr. Benjamín Gutiérrez Contreras, managing partner of BGA Abogados, developed his doctoral thesis “The Due Diligence Contract: Its True Legal Nature” within the Academic Doctorate in Commercial Law and Civil Procedure. He earned the distinction summa cum laude and a score of 100.
The research studies contract autonomy, its applications, team liabilities, and final report structure. It includes a practical manual for organizing the engagement and its execution. This foundation allows explaining to the client what investigation they need and how it should be structured for its results to be useful.
Request a proposal for your transaction
If you are planning to buy a company, acquire shares, invest in real estate, or prepare your business for sale, contact BGA Abogados. Let us know the type of transaction, stage of negotiation, and expected date to decide or close.
With that information, we can evaluate the scope of the service and present you with a proposal containing the review areas, deliverables, estimated timelines, and corresponding fees.
