IC_case study

Selling a subdivision? You need a Tax and Financial Due Dilligence


An international Group of companies engaged SCHNEIDER GROUP to perform tax and financial due diligence of two subdivisions located in Western Siberia and Central Russia in preparation for their potential sale. In two days, SCNHEIDER GROUP team met the management at one of plants while in parallel the other team members conducted an overview of tax and accounting data provided.


The review comprised several focus areas, including assessment of the integrity of the Company’s financial reporting framework, tax compliance, and internal controls. Firstly, SCHNEIDER GROUP undertook an initial check and identified business risks and how they might be mitigated and managed for the purposes of the planned sale. As both subdivisions are located at chemical plants with restricted access, SCHNEIDER GROUP experts proposed an obligatory assessment of employees’ workplaces with regards to harmful conditions. Foreseeing a negative assessment, SCHNEIDER GROUP recommended concluding additional labor contracts covering harmful conditions and providing employees with special payments and benefits. Since the moment of official registration, the Company’s legal address had changed. In order to avoid an administrative fine for providing deliberately false information to the authorities, SCHNEIDER GROUP experts recommend changing the legal address to the actual location.
Along with broadened financial analysis, SCHNEDIER GROUP provided spot-checks comprising deep dives into the tax reporting and internal control systems, including financial counterparty risk assessment. Related-party checks revealed the Company’s dependency on a few customers controllable by one entity in the territory where both subdivisions are located. Annual reconciliations with tax authorities, suppliers, customers, and the bank’s currency control department, provides users of financial statements with reasonable assurance that the information provided is accurate and up-to-date. SCHNEIDER GROUP recommended performing these checks and documenting them with acts of reconciliation. SCHNEIDER GROUP experts performed a general director reputation check regarding their participation in trials, proprietary rights and obligations, criminal and administrative liability, and negative credit information. For the reviewed period, the Company had an unfulfilled obligation to submit notices for transfer-pricing.


Any control failings or weaknesses identified were discussed in a review, along with the underlying reasons and impact they may have on the potential sale transaction. This report, together with other sources of information such as legal due diligence, provided a balanced assessment of the principal risks, business performance, and effectiveness of internal control systems.

Contact us

Ekaterina Kvaskova
Group Director Internal Controls and Audits
+7 / 495 / 956 55 57
Natalia Dobrova
Internal Controls Team Leader
+7 / 495 / 956 55 57

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