CS Professional · Banking and Insurance - Laws and Practice · Professional Opportunities
A Company Secretary is engaged to carry out due diligence on a small general insurance company that a promoter group plans to acquire. Which of the following is the most appropriate focus of her due diligence work?
Her due diligence should concentrate on verifying the target's statutory records, regulatory approvals, licence conditions, notices and litigation. This tests legal and regulatory standing before acquisition. Pricing, guaranteeing solvency or taking the auditor role are not part of a due diligence engagement.
- AVerifying statutory registers, regulatory approvals, licence conditions, pending notices and litigation of the targetCorrect
- BFixing the premium rates for the target's motor insurance portfolio
- CPersonally guaranteeing the target's solvency margin to the acquirer
- DAppointing herself as the target's statutory auditor after the deal
Explanation
Due diligence examines the legal and regulatory standing of the target, including records, approvals, licence conditions, notices and litigation. Setting premium rates is a business or actuarial decision, guaranteeing solvency is not a professional role, and self-appointment as auditor would be improper and outside the engagement.
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