How to check a counterparty before a deal

What a basic registration check confirms

A commercial register extract is the right starting point and a poor stopping point. It confirms a narrow set of facts: that a company with that name and registration number is entered in the register, holds a particular status, and has a registered address, a registration date and a declared type of activity. In most European jurisdictions this information is public and available through national registers linked in the pan-European company search system.

The problem is not the quality of the data but the question it answers. A register entry answers the question "does this company exist legally". Your actual question is different: "will this party perform an obligation worth eight hundred thousand euros, and what will I be able to do if it does not". Everything a check consists of lies between those two questions.

The second limitation is time. The register describes the past. Months pass between an entry being made and your transaction, and in some jurisdictions changes are filed with a lawful delay. The director may have changed, a shareholding may have been transferred, the company may have entered a procedure. How current the extract is on the date of signing matters more than what it contains.

Third, the fact of registration says nothing about solvency. A company with "active" status may have no staff, no turnover and no assets. Registration is permission to exist, not confirmation of an ability to perform.

How to establish the exact legal entity and avoid checking a company with the same name

How to reconstruct owners, beneficial owners and actual control

The international transparency standard proceeds from the premise that behind every legal entity there is a natural person who ultimately owns or controls it. The requirement to disclose such a person - the beneficial owner - is set out in the FATF recommendations and implemented differently across national regimes: in some through a public register, in others through access upon reasoned request, in others through the company's own obligation to keep current information.

The practical consequence: the availability of beneficial ownership data varies considerably between jurisdictions, and the absence of a record does not mean the absence of a beneficial owner. It means the data has not been disclosed in that register - and the question moves from documentary confirmation to reconstruction.

The formal structure and actual control do not always coincide. Between them stand nominee holders, trusts, shareholder agreements, share pledges, options, powers of attorney with broad authority. A person may not be listed as the holder of a single share and still determine every decision the company makes. And conversely: a person in the register may be a bona fide holder with no real influence.

Reconstructing control is work with indirect indicators, and its results carry different weight. Matching addresses, overlapping directors between related companies, a shared telephone number in historical records, the sequence of corporate changes, public statements about the ownership of a business - all of this is data lawfully collected from open sources. But the conclusion drawn from it is precisely a conclusion, not a fact. It is stated as "the structure shows indications of control by such-and-such person", not "such-and-such is the actual owner".

This distinction is not legal caution for caution's sake. It determines what you can do next: a confirmed fact can form the basis of a claim, a reasoned conclusion the basis of a negotiating position and protective contractual terms, a hypothesis only the basis for further checking.

Граница вывода. A complex structure is not in itself an indication of wrongdoing. Holdings, trusts and multi-tier ownership are standard instruments. What matters is not complexity but the discrepancy between the declared structure and observed behaviour.

How to check a director, a power of attorney and the signatory's limits

A signature by a person who lacked authority turns a contract into a dispute over its validity. This is a rare but expensive scenario, and it is checked in three steps.

The first - whether the signatory is who they claim to be, and whether they are listed as an authorised person in the register as at the date of signing. Not in an extract three months old, but as at the date.

The second - whether they are acting within their authority. Constitutional documents and corporate resolutions often limit a director by transaction value, by type of operation, by the need for shareholder approval. A limitation may not be public, and then the only way to see it is to request the constitutional documents and the approval resolution from the counterparty. A refusal to provide such documents in a transaction of material size is in itself informative.

The third - if a representative signs under a power of attorney, the power of attorney itself is checked: who issued it, for what term, what scope of authority, whether it has been revoked. A copy of the power of attorney is attached to the contract as an annex - an inexpensive measure that closes off an expensive risk.

A separate matter is signing in another country and in another language. The formal requirements for a transaction are determined by the applicable law; a number of operations require notarisation, an apostille or legalisation. This needs to be dealt with before signing, not afterwards, when the registrar or the court will not accept the document.

How to compare declared activity with actual resources

At this point the check stops being documentary and becomes analytical. The question is a simple one: is this company physically capable of performing what it promises.

The answer comes from comparison. The stated supply volume - against the warehouse, production and transport capacity visible from addresses, publications and industry sources. The promised timelines - against headcount. The size of the contract - against the company's turnover per the latest available accounts. The field of activity in the contract - against the activities declared at registration.

A discrepancy does not mean deception. A company may engage subcontractors, lease capacity, or grow faster than its accounts are updated. But a discrepancy moves the transaction into a different risk category and calls for an explanation from the counterparty - and the explanation either resolves the question or reinforces it.

One useful indicator is the length of existence and continuity of activity. A company registered a few weeks before negotiations and immediately bidding for a large contract requires an explanation of where its resources come from. This is not an accusation: new companies are created all the time, including as project vehicles within stable groups. But in that case there is a group behind the project vehicle, and it is the group that must be checked.

The availability of accounts is a separate matter. In some jurisdictions financial statements are published and provide a basis for calculation. In others they are not public, and then the only route is to request documents from the counterparty itself. Willingness to provide them is a significant signal in its own right - and it works both ways.

Which court, sanctions and financial events affect the decision

Events around a company are read not by their number but by their type, the party's role and the trend.

Court cases. A company with turnover always has disputes - their absence is sometimes more suspicious than their presence. What matters is the party's role: consistently appearing as defendant in claims for non-performance says something different from recovering one's own receivables. The trend also matters: an isolated dispute is a working situation, while a growing series of similar claims over the past year is a signal.

Insolvency proceedings. Proceedings that have been commenced or recently concluded change the terms of a transaction fundamentally - up to the risk of challenge to payments made in the preceding period.

Sanctions and restrictive measures. There is no room for value judgements here: the lists are maintained officially, checking is mandatory, and it extends not only to the company itself but also to its owners, beneficial owners and, under certain regimes, to persons under their control. The European Union publishes consolidated information on restrictive measures in force and related resources; checks must be run against official sources as at the date of the transaction, not against aggregators, which may lag behind.

Media coverage. This is the least reliable layer - and the most tempting. A publication confirms the fact of publication, not the fact of the event. It may be honest journalism, an element of informational pressure, or the result of an error. It cannot be cited as evidence of a breach, but it can and should be used as grounds for checking against primary sources.

Граница вывода. Neither the status of a politically exposed person, nor a complex structure, nor a court dispute, nor negative coverage is evidence of a breach. These are grounds for a closer check and for protective provisions, no more.

Why the payment route is checked separately

A company may be beyond reproach while the payment route is the source of the problem. This layer is checked separately, because the risk here is different in nature.

The first thing to verify is whether the payee is the same as the party to the contract. A request to transfer funds to the account of another person - a related company, an agent, an individual - is common and sometimes has a lawful explanation. But it changes your legal position: you are performing an obligation owed to one person while paying another, and in the event of a dispute this will have to be justified.

The second is the jurisdiction of the account and how it relates to the jurisdiction of the company and the place of performance. A mismatch is usually explicable, but the explanation should be given before payment, not after.

Third - the channel through which payment details are received. Substitution of payment details in correspondence is one of the most widespread types of fraud in international settlements, and it does not require any compromise on your side: access to the counterparty's mailbox is enough. The only reliable protection is simple and mandatory - confirmation of payment details through an independent channel of communication initiated by you, using a contact obtained from a source other than the same message. This applies in particular where the details have changed at the final stage of the transaction, with wording about urgency.

Fourth - the moment when risk passes. Advance payment without security to a new counterparty is a decision, not a formality. It should be taken deliberately and with an understanding of what recovery instrument will remain available to you.

Граница вывода. Verifying the payment route reduces the risk of substitution and of payment to the wrong recipient. It does not guarantee recovery of funds in the event of non-performance - that is a matter for security, not for verification.

Which protective provisions can be included in the transaction

Verification does not remove risk - it makes it visible. The risk then has to be allocated, and that is done through the terms of the contract. What follows is not legal advice but a list of points worth working through with a lawyer, based on the results of the check.

Representations as to circumstances. The counterparty confirms in writing what you were unable to verify from documents: the ownership structure, the absence of restrictive measures, the signatory's authority, the absence of insolvency proceedings. The value is twofold: a representation provides a basis for liability, and a refusal to give one provides information before signing.

Security. An advance against a bank guarantee, a letter of credit, escrow, a parent company guarantee, a pledge. The instrument is chosen according to the size and nature of the risk: the more conclusions rather than facts the check has left behind, the more substantial the security should be.

Splitting payments into stages. The simplest and often the most effective instrument: payment follows performance rather than preceding it. It requires neither guarantees nor expense.

Change of control provision. Gives the right to withdraw or renegotiate terms if the owner of the company changes. Useful where the decision rests largely on the reputation of particular individuals.

The right to verify and to receive updated information. An obligation on the counterparty to disclose changes in structure and status during the term of the contract turns a one-off check into a continuous one.

Governing law and dispute resolution clause. The forum for the dispute and the prospect of recognition of the award in the country where the assets are located matter more than the wording on governing law. A judgment won but unenforceable anywhere is worth little.

What a professional process looks like

The order matters: each step relies on the result of the previous one, and the volume of work is determined by the size of the transaction, not by the habit of producing a "full package".

1. 01

   Defining the task

   What the transaction is, the amount, the jurisdictions involved, the time available for a decision, what is already known and from what source.

2. 02

   Identification

   The exact legal entity by number and jurisdiction. Reconciliation of the contract, the invoice and the payment details.

3. 03

   Registry layer

   Status, history of changes, the signatory's authority as at the date. Official registers, not aggregators.

4. 04

   Structure and control

   Participants, beneficial owners, related companies. Separation of what is confirmed from what is reconstructed.

5. 05

   Activity and events

   Resources against obligations. Litigation, sanctions and financial events with an assessment of their weight.

6. 06

   Transaction

   The payment route, security, a list of points for protective provisions.

7. 07

   Report and decision

   Fact, conclusion, hypothesis and unknown - kept separate. Specific recommendations, not a "reliable / unreliable" rating.

What the client receives as a result

• Identification of the party suitable for the contract: the exact entity, number, jurisdiction, the signatory's authority as at the date.
• A map of control with an explicit separation: what is confirmed by an entry in a register, what has been reconstructed from a combination of indicators, and what remained unavailable.
• A comparison of the obligation with the resources and a list of discrepancies worth raising with the counterparty before signing.
• A check against official sanctions and court sources as at the date, not as at the date of an old extract.
• A list of points in the contract that close the gaps identified - for use with your lawyer.
• A direct answer to the question of what the check did not establish, and why.

Limitations and the lawfulness of methods

A counterparty check is built on open and officially available sources: trade and corporate registers, court databases, official sanctions lists, public filings, industry and media publications, and information provided by the counterparty itself.

We do not obtain access to banking secrecy, do not request data protected by law from persons who have no right to disclose it, and do not use methods that breach personal data legislation. This is not a statement of good intentions: information obtained unlawfully cannot be used in negotiations or in court, and its presence in a report creates a risk for the client.

What a check does not guarantee. It does not predict the counterparty's future conduct. It does not prove fault and does not establish facts that only a court is entitled to establish. It does not replace legal review of the contract. It does not uncover what has left no trace in any available source.

What it gives instead: an understanding of exactly where the assumption sits in your decision - and the opportunity to close that point with a contractual condition or security before the money has left.

What to prepare for the initial assessment

• The exact name, registration number and jurisdiction of the counterparty - from the draft contract, not from a presentation.
• The draft contract or its material terms: subject matter, amount, timing, payment arrangements.
• The name and position of the signatory, and, if a representative is signing, the details of the power of attorney.
• The bank details stated in the invoice, and the channel through which they were received.
• The date by which a decision must be taken.
• What you have already checked yourself and from which sources - so that you do not pay for duplicated work.

Documents and files are not needed at the first stage. The items listed are enough to assess the scope of work and the timeframe.

Frequently asked questions

• 01

  Is a register extract enough if the transaction amount is small?

  For a small one-off transaction with payment on performance - often yes, provided the extract is current and the identifiers have been checked against the contract and the invoice. The scope of a check should be proportionate to the size of the risk. The problem begins where the extract is used as grounds for prepayment.

• 02

  How long does a counterparty check take?

• 03

  Can the actual beneficial owner be established if he is not disclosed in the register?

• 04

  What if the counterparty refuses to provide documents?

• 05

  Are court disputes involving a counterparty a bad sign?

• 06

  Do you check counterparties in countries with closed registers?

• 07

  How does this differ from full Due Diligence?

• 08

  Will the check remain confidential from the counterparty?

Conclusion

The difference between a superficial and a proper check is not the number of documents collected. It is that a proper check honestly separates what is confirmed from what is assumed - and shows the exact point at which you are making a decision blind.

Beyond that, it ceases to be a question of information and becomes a question of terms: a warranty, security, staged payment, independent confirmation of bank details. Each of these instruments costs less than enforcement.

A good check does not produce a verdict of "reliable" or "unreliable". It produces a list of points where you can act differently while the transaction is still unsigned.

Официальные источники

• European e-Justice PortalBeneficial Ownership Registers Interconnection System (BORIS)проверено 05.08.2026

  The system interconnecting national EU beneficial ownership registers: confirms that access to such data differs by jurisdiction.

• European CommissionAnti-money laundering and countering the financing of terrorism at EU levelпроверено 05.08.2026

  The EU framework on beneficial ownership disclosure and counterparty checks - the basis for requirements on structural transparency.

• European e-Justice PortalBusiness registers - search for a company in the EUпроверено 05.08.2026

  Official access to the national commercial registers of EU countries: confirms the composition of public information about a company.

• European CommissionOverview of sanctions and related resourcesпроверено 05.08.2026

  Official information on restrictive measures in force in the EU - a source for sanctions screening as at the transaction date.

Связанные материалы

Case

A hidden beneficial owner in an offshore structure

Reconstruction of control from the totality of open data: what could be confirmed from documents and what remained a reasoned conclusion.

• 01 /ServiceCompany Due Diligence→
• 02 /ArticleSigns of a nominee owner in a company structure→
• 03 /ArticleChecks before a partnership: what is verified about an individual→
• 04 /ArticleHow debtors conceal assets→