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Introduction

Due diligence (DD) exercises looking at employment-related securities (ERS) and share schemes take place in a number of circumstances but broadly all with the same aim ― to look at risk areas around ERS and share schemes where there could be liabilities, penalties or other risks for the company. Where possible, the DD report will quantify those risks.

It is worth noting that tax liabilities which do not rest with the company are not usually within the scope of a DD report eg income tax charges which fall solely on an employee or director would not be within scope, but income tax due via PAYE would be.

An ERS DD could be expected when any mergers and acquisitions (M&A) activity is due to take place. This includes, but is not limited to:

1. •

   when marketing the company for sale

2. •

   a bank or other lender considers making a loan to the company

3. •

   a person or organisation considers investing in a business

4. •

   when preparing to