Business risk: Concluding contracts while preventing risks

Business risk: Concluding contracts while preventing risks

The conclusion of a contract is, it would seem, the most common thing in business. But at the same time, this activity requires considerable attention, as it can hide a considerable number of risks that are dangerous for the enterprise, at least unwanted financial losses.

And they can arise not only because of improper performance of the contract by the counterparty, spoilage of goods, or the occurrence of force majeure circumstances.

This is why it is considered ideal that businesses turn to Transaction Advisory Firms in India to avoid any unfortunate consequence of forming or coming into an illicit contract.

Realization of tax and other risks when concluding a contract is a very real thing and it happens when the company, its officials, or employees carelessly observe the “letter of the law” when concluding a contract, or neglect law enforcement practices, and sometimes even common logic.

Every documentary tax audit, without exception, begins with the auditor’s examination of the company’s contracts. And not only the further course of the inspection itself but also its results depend on how such contracts are drawn up and with what documents they are “completed”.

In an undesirable scenario, you can expect additional monetary obligations for taxes and fees, fines, and interest. In an even worse case, company officials may be held criminally liable.

So, let’s consider the main nuances that should be considered when concluding contracts to be able, if not to prevent overcharging, at least to form a justified legal position that will allow you to defend your interests in court.

Attention to the counterparty

 

The favorite claim of tax officials to economic transactions is their “unreality”. The conclusion about such unreality can be made, in fact, from anything, and one of these reasons is the “defect” of the counterparty. This is the case when the enterprise cannot always influence the situation but is quite capable of taking measures that will allow minimizing risks in the future.

Probably, everyone has heard about the principle of “due diligence”. This is a certain “sufficient” set of actions, the performance of which will allow the company to declare that it did everything in its power to ensure the reliability of its counterparty.

What is the reason behind an increasing need for transaction advisory and due diligence among companies?

 

During its course, every company is required to comply with some rules and regulations. When entering a contract, checking the dependability and authenticity of the other party is one of the legal obligations of the company.

By doing so, the business owners save themselves from getting fined or even arrested in some circumstances. However, this is not the only way due diligence helps a business. A company, by performing due diligence in consultation with transaction advisors, also safeguards its reputation in the market and hence, financial losses.

So, how to make sure that your contracts are made and signed under the supervision of experts? Just turn to Transaction Advisory Firms in India.

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