Legal Due Diligence: The Files a Buyer Opens First

Here is the order in which a professional buyer typically asks for these files, and what a Swiss data room needs to show before anyone sets foot on site. A well prepared SME does not need flawless files: it needs files that are complete and consistent with one another.

The twelve files, in order

1. Employment contracts for key staff. Non-compete clauses, notice periods, and above all any change of control clause that could trigger a severance payment or termination at closing.
2. Major client contracts. Remaining term, whether renewal is automatic, and any termination clause tied to a change of ownership: a contract that lapses automatically once the shares change hands is worth far less than one that survives the sale.
3. Strategic supplier contracts. Exclusivity terms, payment conditions, and reliance on a single supplier with no identified fallback.
4. Commercial leases. Remaining term, whether it can be assigned to the buyer, rent compared with the local market, and any bank guarantees already pledged.
5. Intellectual property. Are trademarks, patents and domain names registered in the company's name, or, as often happens, still in the founder's personal name and never transferred.
6. Software licences and IT contracts. Subscriptions, data hosting, and whether the licences actually used in production match what was originally purchased.
7. Pending disputes and provisions. Labour tribunal cases, commercial disputes, open tax proceedings, and whether each one is provisioned at its true value in the accounts.
8. Articles of association and shareholder agreement. Pre-emption rights, drag-along clauses, decision quorums: a clause that looked like paperwork drafted by the fiduciary fifteen years ago can block an entire transaction today.
9. Sector specific permits and authorisations. Environmental, workplace safety, professional licensing: what matters is their validity and transferability to the new owner, not just their existence.
10. Mortgage notes and security interests (cédules hypothécaires). What actually encumbers the company's assets, and what needs to be released or transferred before the buyer's financing can close.
11. Data protection. A register of processing activities, contracts with IT subcontractors, and the legal basis for the customer file: an area Swiss and European compliance increasingly scrutinise, including at SMEs that do not think it concerns them.
12. Insurance policies. Current coverage, recent unresolved claims, and exclusions that could leave an operational risk uncovered once ownership changes.

These twelve files do not carry equal weight in every sector: a precision machining workshop will be judged mostly on its leases and mortgage notes, a services firm mostly on its client contracts and intellectual property. But the order in which a buyer asks for them stays remarkably stable across sectors, because it mirrors the order in which an unidentified risk becomes most expensive to discover late.

What happens when a file is missing

A single missing file almost never derails a sale on its own. What derails it is three or four gaps surfacing one after another, each pushing the closing date back a week or two, until the buyer starts wondering what else has not yet turned up. A client contract with no change of control clause found under file 2, a trademark still registered in the founder's own name found under file 5: taken alone, each is a week's work to fix. Added together, they reshape how the buyer reads the rigour of the whole company, far beyond the legal file itself.

Legal due diligence is only one of the four areas a buyer works through, but it is usually the first to open, generally once the letter of intent is signed.

Opening a data room before these twelve files are assembled also raises a confidentiality question: better to gather them internally, away from teams that have not been informed yet, before giving any outsider access.

The same logic, complete rather than flawless, applies on the numbers side too: getting the accounts ready before a sale follows the same principle, removing in advance the questions a buyer would ask anyway.

Pulling these twelve files together is not a job done alone, a few weeks before the data room opens. The corporate lawyer on the file knows where to find a shareholder agreement misplaced ten years ago; the fiduciary tracks down a provision that was never formally booked; and often it is the executive assistant who knows exactly which physical binder still holds the original lease, never scanned. An owner who delegates this collection too late finds the gaps at the same time the buyer does, which amounts to finding them too late to close quietly.

An owner who has these twelve files ready before the first conversation with a buyer does not just save time. It changes the tone of the examination: whoever asks the questions expects answers; whoever has already written them expects confirmation.