Аrticles 21/04/2020 09/11/2021

Analyse It: a Checklist for Checking Counterparties in YouControl

Risk is a noble cause far from always. For example, the risk to the welfare and reputation of a company is not justified at all. Especially when you have quick access to all the information about a potential counterparty. In this article we will show you how to check a business partner step by step in order to reduce the risks of cooperation.

Whom to Check?

Any business partner is potentially able to harm you (this is not paranoia but rational prudence, based on many cases from the practice of Ukrainian and foreign legal entities). Therefore, checking will not be amiss if you work with at least one of the following types of counterparties:

• buyer/seller (supplier);

• executor(contractor)/customer;

• pledgee/pledger;

• consignor/commission agent;

• lessor/lessee.

Commercial and state-owned enterprises are equally at risk, so no one should ignore the stage of checking.

Why to Check Counterparties?

What exact risks are meant? Money, reputation and time (in any sequence and combination) can be exposed to danger. An unreliable buyer can ignore accounts receivable, a fake manufacturer can provide low-quality goods and a partner-debtor can attract inspections of the fiscal services.

Unfulfilled obligations and breach of terms of agreements, cessation of production and/or operating activity, loss of money and damage to reputation, subsequent lawsuits – all these things are not exaggerated consequences of cooperation with unchecked counterparties.

How to Check Counterparties?

All companies and agreements are individual, but there is a universal list of rules the following of which must be obligatory for all. Master them and rid your agreements of many dangers.

1. Status of a legal entity. Make sure that the company you intend to cooperate with is not in the state of termination and is not bankrupt. Otherwise you cannot count on the fulfillment of obligations on its part.

2. Debts on taxes and fees. It is doubtful that an entrepreneur who does not settle accounts in time, even with the state regulator, will become a reliable partner.

3. (Non)involvement in fraud and corruption-related offences. According to the Law of Ukraine "On Protection of Economic Competition", violators are subject to fines and other penalties, but the real danger of cooperation with fraudsters is much higher.

4. Presence of licences. If your partner is engaged in licensed activity without a proper permit, then not only s/he but also you can have problems.

5. Property. Find out what real estate, plots of land, transport, brands a counterparty owns.

6. Financial-industrial groups. Companies belonging to financial-industrial groups are influenced by those individuals who run (control) FIGs.

7. Links. Find links between companies, as well as between companies and individuals.

8. Individuals. Check the executives, beneficiaries, director of a counterparty and pay attention to their links with certain political forces and/or national politically exposed persons who may use their "administrative resource".

You can master the skills of fast and high-quality checking with the help of an expert from YouControl. We are constantly in touch for you to be able to do business transparently and with maximum awareness.

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