The Role of International Due Diligence & Process Agent Services in Cross-Border Transactions

What this is: This article explores the importance of international due diligence and the role of a process agent as essential elements in successful cross-border transactions.

What this means: When entering cross-border transactions, companies face a range of legal and logistical complexities. Appointing a process agent helps simplify this landscape by ensuring compliance, protecting each party’s interests, and keeping communication clear across different jurisdictions.

The Rise of Globalisation and Cross-Border Transactions

Globalisation has erased traditional business boundaries, making cross-border transactions a cornerstone of modern commerce. Historically, the global trading system has demonstrated remarkable resilience, consistently finding alternative channels to maintain commercial flows. According to UNCTAD, in 2024, world trade saw a record expansion to $33 trillion – up 3.7 from 2023.

Businesses, keen to fuel their growth, are increasingly adapting to diversify operations to other geographies and tap into these new markets. However, diversifying trade networks across multiple regions has additional challenges and risks. The easing of global trade barriers, driven by new agreements and digital business models, has enabled market access in regions such as Asia, North America, and Africa over the past two decades.

For businesses engaging in cross-border transactions, conducting proper due diligence and appointing a service company with global reach and expertise are good first steps.

What is a Cross-Border Transaction?

A cross-border transaction is any business deal or financial activity between parties (individuals, companies or governments) across different countries or jurisdictions. These transactions involve navigating multiple legal systems, currencies, regulatory frameworks, and business practices. They can include (but are not limited to) mergers and acquisitions, joint ventures, cross-border financings, foreign investments, etc.

Companies may expand internationally to capitalise on market growth opportunities, including cost advantages (lower labour/tax rates), reduced reliance on domestic markets, and economies of scale – though these benefits must be weighed against heightened operational complexity and compliance demands.

Any cross-border transaction will typically involve conducting due diligence, which means thoroughly assessing a foreign business, partner, or investment opportunity before finalising it. This involves verifying legal, financial, operational, and compliance-related aspects to ensure transparency, reduce risk, and confirm that the deal aligns with regulatory and strategic goals across jurisdictions and is in line with the negotiated commercial arrangement.

The Critical Role of International Due Diligence

International due diligence serves as the essential investigative foundation for cross-border transactions, enabling companies to identify and mitigate risks unique to foreign jurisdictions before committing their resources.

The risks of cross-border transactions include unreliable corporate structures, hidden litigation or financial liabilities, and non-compliance with local tax, labour, and IP laws. Without thorough international due diligence, organisations expose themselves to these risks along with reputational damage and financial losses that could render an otherwise promising cross-border opportunity into a costly failure.

Key Components of Legal Due Diligence

Legal due diligence depends on four key search types:

1. Corporate Searches: Verify company information and compliance, and confirm that a company is legally registered within a jurisdiction. 
2. IP Searches: Identify existing patents/trademark ownership and assignments, assess intellectual property rights strength, and discover potential licensing opportunities.
3. Lien Searches: Reveal hidden liabilities and claims on assets across jurisdictions, helping manage risk and prevent litigation by protecting buyers from inheriting debt.
4. Litigation Searches: May require physical court visits with restricted access, with results varying due to differences in court procedures, documentation requirements, and litigiousness across jurisdictions.

A plan of action to implement all four components is essential, as is selecting a service provider with global reach and expertise.

Challenges in Cross-Border Due Diligence

The due diligence process for a global business needs to take the following into account:

• Information availability and accessibility
  • Third-party access to corporate registry and electronic databases varies greatly between jurisdictions
  • The quality and timeliness of public record information are not the same all over the world.
  • There may be certain access restrictions based on the nationality or residence of the searcher, which makes it difficult to gather data from another part of the world (such as Hong Kong, Singapore, South Africa, etc).
  • Levels of corporate transparency greatly differ around the world (for instance, in the US, corporate beneficial ownership information is not public for most companies).
  • Tax information is largely confidential in most European jurisdictions.
• Timelines for obtaining documents 
  • Some jurisdictions (e.g., the US) allow near-instant document retrieval. Others may take weeks or even months due to limitations on digital access to information.
  • Timelines can be impacted by several factors:
  • How accessible registries are
  • Whether documents need translating
  • Whether digital channels are available for information to be retrieved, a local resident is required for accessing the digital channels, or physical visits to government offices are required.
  • Differences in time zones can complicate the coordination of due diligence activities, resulting in delays and communication issues.
• IP rights and data protection 
  • IP laws and protection mechanisms vary significantly across jurisdictions.
  • Cultural and normative differences in local sentiment toward IP rights can affect ownership.
  • Cross-border deals may expose IP to weaker protections in certain regions. Many governments impose restrictions on transfers to ensure data is adequately protected in the receiving jurisdiction.
• Other noteworthy challenges
  • Geopolitical and economic risks (political instability, government changes or trade tensions).
  • Language barriers and translation needs.
  • Local business practices, norms and culture.

Best Practice for Conducting Corporate Cross-Border Due Diligence

Step 1: Set Up a Comprehensive Due Diligence Framework

A due diligence framework will take into account all relevant aspects of the target company’s operations, including its global footprint. Creating a framework involves mapping out all jurisdictions where the company operates or holds assets, identifying the extent of coverage, and evaluating the availability – or lack of – critical information in each region. To do this effectively, it’s essential to have a strong understanding of the corporate structure, regulatory environment, and business landscape in which the company functions.

Example: In a merger and acquisition transaction, two holding companies may have several subsidiaries located in different parts of the world. A proper due diligence framework will account for the investigation of potential liabilities and risks of subsidiary companies across multiple jurisdictions.

Step 2: Partner with Local Experts 

Local partners that have jurisdictional reach and understand regional laws are highly valuable, allowing you to quantify legal risk much more efficiently. Regional experts will also be able to obtain information that non-residents may not have access to.

Example: A UAE free-trade zone can span multiple jurisdictions, across which the quality and quantity of data may vary immensely. A local expert will have the knowledge and means to navigate this complexity and retrieve the information needed.

Step 3: Establish a Timeline

Most cross-border transactions are time-sensitive and have a firm completion deadline, making it essential to plan the due diligence process well in advance and establish a clear timeline from the outset. 

Timelines can vary significantly depending on the jurisdictions involved.  If the transaction spans countries within Europe and North America, the process may be quicker than in jurisdictions with limited data access or different regulatory frameworks.

Consider that access to court records and litigation information varies not only by jurisdiction but also by the types of courts in those jurisdictions, which can compound the time in which information is gathered. You may also need extra time to translate documents and consider geography-specific adaptations, such as in-person court visits to obtain litigation records. 

Step 4: Conduct Multiple Searches at Different Stages 

It’s best to start early so there’s enough time to conduct a thorough due diligence process. Some firms order preliminary searches months ahead, then repeat the searches closer to closing to capture updates. Compare multiple search sets (e.g., 2–3 rounds) so you can capture the most comprehensive and current data possible.

It’s also vital to evaluate cost against value. Repeating searches can be expensive, but will mitigate risks such as undisclosed liens or new litigation. Remember that international deals often require localised searches (e.g., notaries, registries), which can compound complexity and cost.

The Role of Process Agents in Cross-Border Transactions

A process agent is an agent for service of process (which also may be referred to as the agent for service or contract agent) frequently required by lenders to be appointed in commercial financing transactions. The process agent will receive legal documents and notices related to a financing transaction and forward them to a designated contact, while also ensuring that the appropriate steps are taken in a timely manner when service of process is received. 

The choice of law jurisdiction is negotiated by the parties involved and can vary depending on each party’s country (or US state) of origin. In many cross-border financing transactions, regardless of where the borrower or lender is located, New York and the United Kingdom are common choices due to each jurisdiction’s recognised body of commercial law and established precedent in large financial transactions. If the parties do not have a place of business in the jurisdiction, it is common for the counterparty to ask for a process agent to be appointed in said jurisdiction.

The process agent serves as a point of contact in the jurisdiction where the parties may not have a presence so that legal process arising out of the transaction’s documents may be served. For example, when a UK lender needs to enforce a loan against a Brazilian borrower under English law, the process agent in England creates the necessary jurisdictional link. This also saves parties the time and expense that would be incurred in setting up offices in different states and/or countries.

The appointment of a process agent is a condition precedent, meaning lenders require proof of this legal safeguard before disbursing funds or finalising a transaction. This way, the lender never sacrifices their right to enforce the contract efficiently. Without this prerequisite, organisations risk losing the strategic advantage of resolving disputes swiftly in familiar legal systems.

Process agent appointments are often irrevocable, which means that the appointment remains in force for the duration of the contract. For open-ended transactions like derivatives, agents are initially appointed for a fixed term, renewable upon expiration.

Key Considerations when Appointing a Process Agent

It’s important to find a process agent that understands their role and can meet the requirements of your specific deal. Here are key factors to take into account:

Jurisdictional Coverage

• Make sure the process agent operates in the jurisdiction of your contract. Verify that they understand various types of commercial transactions (loans, derivatives, aviation leasing, M&A, etc).

Reliability & Track Record

• Choose an agent with a proven history of handling legal notices promptly.
• Check if they have secure systems and databases to track and forward documents without delays.
• Avoid “fly-by-night” operators. Check that they are responsive 

Contractual & Practical Factors

• Clarify fees and duration of appointment  (some appointments are indefinite). It is important to have a cost-effective solution in place. 
• Confirm their availability for last-minute changes to deal documents that affect process agent appointments. 

Flexibility & Adaptability

• Process agent services must be able to adjust to unique deal terms.
• Check whether they have robust systems in place.

Cost

• Request a quote and ensure you understand the pricing models you receive.
• Note that some process agents may charge additional fees to expedite delivery of acceptance or additional revision fees – these costs can add up quickly.

For more insight on the role of process agents in cross-border transactions, read our blog: What Is a Process Agent and Why Do You Need One?

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.