Due Diligence Report

On Legal Counseling

Submitted by:

Falsis, Kashmere V.

Submitted to:

Prosecutor Macababbad

Legal Counseling 3-E

S.Y. 2015 - 2016

Introduction

In the light of the recent events, Rural Bank of Calaca has an existing

liquidity problem which caused financial straits to its company. Now our

company is considering to whether or not to acquire the rural bank. In the

onset of the current issue, the first thing we need to perform to aid the

decision making is to review the history of the Rural Bank of Calaca, to see fit

that they have been in the proper exercise of their duty to extend loans and

advances.

This responsibility of the rural bank is coming from the provision of

General Banking Law where their purpose is to meet the normal credit needs

of farmers, fishermen or farm families owning or cultivating land dedicated

to agricultural production as well as the normal credit needs of cooperatives

and merchants.

While the acquisition may promise wider scope of clients for us, it may

also imply financial threats that could cause unnecessary expenditures from

our company.

For the protection of our company we have to look at these

considerable factors:

Liquidity Problem

The main reason for the Rural Bank of Calaca’s financial strait was

caused by liquidity problem which can be traced from unpaid mortgages. As

a company we must be able to look for efficient processes and avenues to

reduce the real estate properties the Rural Bank currently owns.

Being a large company perhaps it will be a positive factor in our part to

acquire the rural bank because for one we are already established and

people’s trust towards us will bring about confidence in people purchasing

these real estate properties.

Directors

Obviously, our company and the Rural Bank of Calaca has different

sets of directors and at the event of the merger as prescribed by the General

Banking Law the total number of directors should not exceed twenty-one

(21).

We have to take into consideration as well the directors that will be

joining us if they are the people that are fit and proper in reaching the goals

of our company and we have to take into consideration as well their

background and related interests such as current investments or businesses

that they are engaged in.

The reason for the stringent background check of the directors is to

make sure that there aren’t any conflicts of interests existing or the

shareholders are in line with the view of our company to prosper and make

the merger a fruitful one.

Non-Allied Undertakings

Under the General Banking Law, Rural banks may invest in companies

that are engaged in warehousing, fertilizers and other agricultural chemicals,

farm equipments distribution, trucking and transportation of agricultural

products, marketing of agricultural products, leasing and other undertakings

as may be determined by the Monetary Board.

We have to study as well if the Rural Bank of Calaca has made efficient

investments in these non-allied undertakings, and we have to be assured of

the validity of the existing partnerships of the rural bank and perform a

series of background checks to the companies which are engaged in the said

businesses.

Employee Relations

Employees form a huge part of the banking business, therefore it is

proper to look into the relationship between the Rural Bank of Calaca and its

employees. From there we can perform interviews and information-gathering

on possible avenues that we can improve if we choose to proceed with the

acquisition/merger.

The more detailed look on this spectrum is magnifying on the

positions, type of work and benefits that are currently entitled to its

workforce. We have to consider on possibly cutting-down and implementing

lay-offs to ensure not only job security but also job efficiency.

Client History

Information concerning the current clients of the Rural Bank of Calaca

is very essential consideration to the acquisition because it will be the life-

blood of the merger and their reaction towards the closing of the bank and

the possible acquisition.

Managers of the bank have knowledge regarding the client histories

and their background. From there we can trace and review all the necessary

details for us to consider the factor that would lead us to consider this

acquisition.

Looking into these factors, we can only presume that it is a risk worth

taking. We only have to gather the necessary information for us to help in

our decision. A huge bank such as ours will not only be able to acquire the

properties the Rural Bank of Calaca owns but also gain the trust and

confidence of the depositors under the rural bank.

It can draw as well multiple depositors in the rural areas where the

Rural Bank of Calaca is situated. Therefore, after gaining the said information

and histories regarding the Rural Bank of Calaca we can finally decide upon

acquiring or engaging into a merger with the Rural Bank.