The Corporate Screening Process

Before you acquire or invest in a company, appoint a new board member, hire a CEO, or make any major purchasing or investment decisions, it’s important to run a corporate due diligence screening. Working with the right company on corporate screenings mitigates risk by ensuring that you’re moving forward with knowledge—knowledge of who you’re appointing to key positions and knowledge of who you’re dealing with as you pursue investments, acquisitions, or mergers with other companies.

The following guide is a quick introduction to corporate due diligence and how a corporate screening can help your business make safer, more informed decisions. We know how much your business is worth to you—here’s how you can take the proper steps to safeguard its future.

What is corporate due diligence?

Put simply, corporate due diligence is a process of careful investigation undertaken by a company prior to engaging in major business transactions with another entity. Most commonly, the phrase applies to the investigative precautions taken by a business prior to an acquisition, investment, or merger.

When considering these kinds of major business decisions, it’s important to know exactly who and what you’re dealing with—and performing proper due diligence on a company you plan to acquire or invest in helps to ensure that you can make an informed, responsible decision.

Certain forms of corporate due diligence are also highly advisable when it comes time to hire high-level executives or appoint new board members. After all, members of the C-Suite will be responsible for representing your company to shareholders, the media, and the public. You’ll want to make sure that the leadership of your company is trustworthy, competent, and experienced before you allow them to make executive decisions for your business.

Corporate due diligence takes a number of forms, but one of the most important is running the proper corporate background screenings. An experienced background screening company can thoroughly investigate the history and qualifications of companies you plan to do business with and individuals you plan to appoint to executive positions—so you can rest easy knowing you’re making safe and informed decisions.

The corporate screening process

There are two vital reasons to conduct a thorough corporate due diligence screening: better, more informed business decisions and regulatory compliance.

Careful, targeted screenings can expose red flags by revealing a history of bankruptcy, criminal convictions, or bad business decisions. Depending on your specific industry, there may also be background screening requirements under the Security and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA), in addition to state and federal screening requirements.

An experienced corporate screening company can help you stay compliant with regulations—and informed in your business decisions—by running targeted database searches for criminal convictions, previous bankruptcies, civil suits, liens and judgments, licensing, education, and more. Taken together, these screenings give you a more complete picture of the company or individual you’re doing business with.

Types of corporate screening services

The specific background screening services your business needs may vary depending on your industry and situation. However, all of the following can serve as useful (and sometimes necessary) elements of a thorough corporate screening.

Nationwide bankruptcy searches

Previous bankruptcies are a major red flag and something you’ll want to know about any person or corporation you choose to do business with. A nationwide bankruptcy search will return information on any previous bankruptcies so you can be sure you aren’t hiring an executive (or acquiring a business) with a history of poor financial decision-making.

UCC lien and judgment searches

If any Uniform Commercial Code (UCC) judgments and liens have been filed against a business or individual, it may give insight into their financial history—and expose shaky finances or poor business decisions. A background screening company can search for UCC judgments and liens and return information including dates and amounts, which can offer another important window into a business or individual’s finances.

SEC and FINRA searches

As mentioned above, the SEC and FINRA may have additional screening and regulatory requirements, depending on your industry. An SEC/FINRA search looks for disciplinary actions taken in the past by the SEC or FINRA, as well as previous employment by firms that have been expelled from the securities industry. In addition, these searches will check for lawsuits, complaints, or arbitration filed by customers.

These searches can help to ensure that your business and hiring decisions are in compliance with SEC and FINRA regulations.

Criminal background searches

As a business, you don’t want to hire—or do business with—individuals with a history of criminal convictions, especially if these convictions involve financial crimes such as fraud or tax evasion. One of the best ways to check for a criminal background is by running criminal history searches.

Usually, this involves conducting searches of county criminal records in all counties an individual has resided in. A country criminal records search will expose any criminal convictions in those counties within the last seven years and return detailed information on past convictions, active warrants, and pending cases.

When pursuing corporate screenings for business purposes, it’s also common to include a federal district criminal search and nationwide criminal locator search. Federal district criminal searches will search through U.S. appellate and district court databases for convictions and pending cases of federal crimes. These searches are useful because they’ll uncover evidence of federal crimes including fraud, tax evasion, and embezzlement.

National criminal record locator searches provide a more thorough criminal history check by pulling data from county courts, statewide criminal databases, and national sex offender and correctional databases. These searches can find criminal convictions that a regular county records search might miss (for example, convictions in counties that an individual did not reside in).

County civil court record searches

Not all past examples of bad behavior will show up on a criminal history check. A county civil court record search will return information on any past civil cases involving an individual. This is especially important in a corporate screening because it may reveal previous disputes involving contracts, property, or finances, in addition to breaches of contract, foreclosures, and product liability suits.

Additional verifications

There are also a number of other screenings that may be advisable depending on the circumstances, particularly when hiring an executive. Education, employment, and professional license verification can check to make sure that a candidate is qualified by confirming that they have the educational and professional background they claim to have, as well as any required licensure.

Protect your business with EagleScreen

Proper corporate due diligence can be the difference between a bad business decision and a responsible, informed move for your company. It protects your business—and your peace of mind—by allowing you to proceed with acquisitions, investments, and C-suite hires from a place of knowledge and certainty.

At EagleScreen, we have the industry experience to complete thorough, dependable pre-employment and corporate screenings to help safeguard your business. Our customizable screening programs allow you to tailor your corporate screenings to your needs.

In addition, we pride ourselves on our commitment to security and compliance. Our paperless, secure platform ensures that candidates’ information remains confidential, in addition to speeding the process by increasing efficiency. And you can rest assured that all background checks through EagleScreen are run in total compliance with all applicable laws and regulations.

For more information on how EagleScreen’s corporate screenings can help you protect your business, contact us.

Recent Post

Subscribe Here

Subscribe to The Works for monthly updates and insight on changing hiring laws and background check best practices.

    What Our Customers Say