Lack of documentation of business transactions, specifically in employment and securities areas, can expose a company to fines and liability. Furthermore, financing opportunities can be lost if corporate records cannot pass the due diligence review of lenders or underwriters. Additionally, not having proper legal documentation of strategic alliances and contracts can significantly decrease a company s value. Permitting Unauditable Accounting Records and Systems. Bankers and equity investors will require accurate accounting records and systems before investing in a business.
Some situations require audited financial statements.
Keeping clean, accurate, and timely financial records is the cost effective approach. Violating Securities Laws. Federal and state securities laws require every offer of a security to be registered or exempt from registration. Securities are very broadly defined and can include investment contracts, membership agreements, and a variety of other transactions that may seem not to be a security. Many states aggressively police securities transactions, usually becoming involved with investor complaints before the federal government gets involved.