One of the first records a lender should obtain in satisfying their due diligence, is requesting the Charter Documents. This is a key piece of information that our clients sometimes opt-out of or even attempt to resolve by obtaining a good standing; neither of which are good practice. As a client recently learned, knowing the accurate and most current name of a business entity can make or break the validity of your due diligence intelligence.
So whats the benefit to ordering the Charter Documents? The Charter Documents will provide the secured party and searching party with their borrowers accurate business name. Many businesses change their name throughout the course of their life, and ordering Charter Documents is the only way to obtain the amendments which will show changes made to the name.
Verifying your entity by doing a quick search and looking at the entities good standing or Articles only? We’re cringing just thinking about that! This is where things start to go downhill. We recently had a client request a due diligence search based on the name that the potential borrower provided from their Articles of Incorporation only. It turns out that the client had made a minor change to the name, and we caught the variation while searching. We informed our client of the similar name and asked if they would like that name searched as well. In the end, the client incurred larger search fees and had they not ordered the similar name, they could have missed those findings all together.
Do not overlook the importance of obtaining Charter Documents and contact our team for further information regarding how we can assist you with obtaining these records.
Effective December 20, 2017
