Competition & Disputes Archives - Corporate Conversations Asia

Introduction

Differences between FDD and Financial Audit—A financial audit is performed by independent auditors and is an assessment of the company’s financial situation, while an FDD is a process conducted by third-party service providers or individual investors using publicly-available information before investing and includes the identification of any threats, the true value of the company, and determining whether the transaction (investment, business relationship, etc) will be profitable. FDD is a broad category and can refer to several types of due diligence conducted by various actors for different types of transactions.
Recent regulations introduced by MAS that affect FDD processes – MAS imposed due diligence requirements for CFAs in 2023, and these regulations require ‘CF advisers that assist entities in fund-raising from the general public’ to be subject to ‘mandatory minimum standards when conducting financial due diligence on CF transactions’.
MAS ensures FDD through regulation that includes AML, and financial institutions must do it as part of their AML processes to prevent fraud.
Explain AML compliance (can backlink to the previous article published on Singapore’s strategies to guard against money laundering and anti-fraud processes)
Importance of AML compliance in financial services and consequences of non-compliance (penalties)

Preparation before FDD, documents to prepare, etc
Checklist for FDD → Refer to this document. Emphasise that businesses should get the help of a lawyer or FDD service provider to complete this.
Corporate Organisation (group structure chart, certificates of incorporation, shareholder register)
Properties and leases (certificates or titles for properties)
Register of assets, lease, and rental agreements
Contracts and Arrangements (NDAs, agreements with customers and suppliers)
Intellectual property (patents, trademarks, software)
Data protection
Names of management, compensation
Disputes and Litigation – lists of legal claims, and lawsuits, involving the company
Records of bribery and/or corruption

Checklist for what to look for in an FDD partner
Good Track Record – Proven results
Specialised knowledge in your industry – they will be aware of the pitfalls and common areas of risk in the industry
Proactive FDD partner that stays updated on regulatory changes and evolving compliance requirements

References: