Friday, January 20, 2012

Virtual Data Rooms And Legal Compliances In India

Data rooms are essential for maintaining relevant and up to date information by various organisations. Companies have been using data rooms for legal compliances and mergers and acquisitions in India and abroad. However, time has come to shift to the contemporary practices and standards in this regard so that companies can successfully complete various legal due diligences and compliances in India.

For instance, virtual data rooms (VDRs) can be used to store documentary and legal information pertaining to various organisations and companies. If these companies and stakeholders use virtual data room (VDRs) for their legal and due diligence compliances, it can greatly benefit them in managing their legal aspects.

A VDR is essentially a hosted website with limited and controlled accessibility to authorised personnel only. VDR uses secure log in credentials, as supplied by the vendor/authority, which can be modified or disabled at any time by the vendor/authority in appropriate situations. Such log in credentials can be used by the bidders and their advisers to gain access to relevant documents and information.

Establishment of VDRs is considered as a viable and cost effective alternative to traditional data rooms. Electronic legal due diligence relies heavily upon virtual data rooms instead of traditional data rooms. In fact, corruption and technology related legal due diligence may use VDRs in future.

The merger and acquisition trends in India 2011 have shown a decline in merger and acquisition transactions in India except for few areas. Banking related mergers and acquisitions in India are on the cards in the year 2012. The virtual data rooms (VDRs) can be used for the future merger and acquisitions, legal due diligence requirements, loan syndication, private equity and venture capital transactions, etc.

This due diligence process has traditionally used a physical data room to accomplish the disclosure of documents. For reasons of cost, efficiency and security, virtual data rooms have widely replaced the more traditional physical data room.

A VDR is quick to set up. Scanned data and existing electronic files can be mixed, information can be added or eliminated at any time (the changes could be logged if required) and any or all information can be restricted to any or all registered viewers at any time.

There are many disadvantages of a physical data room like time consuming, narrow bandwidth, expensive, cost of travel, paper intensive, etc. On the other hand, VDRs has many advantages like improvement in the number of bidders, increased speed of transactions owing to improved accessibility, enhanced merger and acquisition, takeovers and property deals compared with purely face-to-face and hardcopy document transactions, etc. So time has come to start using VDRs for legal compliances and legal due diligence in India.

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