The Importance of Due Diligence When Buying Property from a Corporation
The Importance of Due Diligence When Buying Property from a Corporation
Buying real estate is a significant financial commitment, and it's essential to exercise due diligence to ensure a smooth and legal transaction. This diligence becomes even more critical when the seller is a corporation. In such cases, there are specific documents and processes that prospective buyers should scrutinize to protect their interests and avoid potential legal complications. This article highlights the key aspects of due diligence before purchasing a property from a corporation and emphasizes the importance of professional assistance.
Obtain SEC Certified Copies of Seller's Documents
When dealing with a corporate seller, it is crucial to request the latest Security Exchange Commission (SEC) Certified Copies of several documents, including:
a. Seller Government Information Sheet (GIS): The GIS contains essential information about the corporation, such as its registered address, directors, officers, and authorized representatives.
b. Corporation Articles and By-Laws: These documents outline the company's structure, rules, and regulations, providing insight into its operations and governance.
c. Board Resolution and Secretary Certificate: These documents are necessary to verify the corporation's authorization to sell the property. They should clearly state the approval of the sale by the board of directors.
d. Corporation BIR TIN Number: This is essential for tax validation purposes, ensuring that the seller complies with tax regulations.
Identify Key Corporate Personnel
Buyers should ascertain the identities of the incorporators and directors of the corporation. Knowing how many directors are involved and who they are is crucial. Additionally, buyers should determine whether the sale requires a majority vote and, if so, who voted in favor of the sale and who the corporation authorizes to handle the transaction.
Address Inactive Corporations and Deceased Directors
In some cases, corporate sellers may have been inactive for years or have directors who are no longer alive. These situations can complicate the sale, but they are not necessarily insurmountable obstacles. With the assistance of a corporate lawyer, it is possible to address issues related to SEC filings and legal problems. Proper legal procedures can help clear the way for a successful sale, ensuring that all heirs benefit from the transaction.
Verify Authorization for Sale
It is not uncommon for sellers to claim authorization through a Special Power of Attorney (SPA) from a board member. However, buyers should be cautious and verify the existence of a Board Resolution supporting the sale. The absence of this resolution can lead to legal complications down the road, potentially jeopardizing the transaction.
Consider Foreign Shareholders
If a corporation has a mix of Filipino and foreign shareholders, it's crucial to secure authorization from all relevant parties. Even if the Filipino shareholders have a majority vote, obtaining approval from the foreign shareholders is advisable. Online validation and legal guidance from a lawyer can help navigate the complexities of involving shareholders abroad and mitigate potential legal issues.
Seek Professional Assistance
Given the intricacies and potential legal pitfalls involved in purchasing property from a corporation, it is highly recommended to engage the services of a professional licensed broker and lawyer. These experts can guide buyers through the due diligence process, review legal documents, and ensure that all necessary steps are taken to protect the buyer's interests.
Conclusion
Purchasing property from a corporation requires a thorough and diligent approach to avoid legal complications and ensure a successful transaction. Requesting the appropriate documents, verifying authorizations, and involving professionals such as licensed brokers and lawyers are essential steps in the process. By taking these precautions, buyers can protect their interests and achieve a smooth and legally sound property acquisition. For more information and expert guidance on due diligence in real estate transactions involving corporations, consider contacting professionals like Samuel O Lao and Associates at 09173236123.
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