Legal due diligence in Tunisia: why it is decisive in an investment transaction

Investing in a Tunisian company can offer significant growth opportunities, but an investment transaction should never be based solely on the target's financial performance or commercial projections. Behind turnover, a valuation or a customer portfolio lie contracts, employees, assets, authorisations, financial commitments, intellectual property rights and sometimes disputes or obligations that are not immediately visible. That is precisely the role of legal due diligence: enabling the investor to understand the company's real legal position before taking a final decision. In 2026, this analysis is particularly important in a context where international investments are becoming more selective. According to UNCTAD, global foreign direct investment flows rose by 6% in 2025 to around USD 1.6 trillion, but the recovery remains concentrated and fragile. Investors therefore attach growing importance to transaction quality and risk control. 1. What is legal due diligence? Legal due diligence is an in-depth analysis of the legal position of a company, an asset or a project before an investment transaction. It may be carried out in the context of: - the acquisition of a company; - an equity investment; - a Private Equity transaction; - a Venture Capital transaction; - a merger; - a joint venture; - a strategic partnership; - a financing; - a restructuring; - a foreign investment; - an asset acquisition. The objective is not merely to look for irregularities. It is above all to determine: what the investor is buying, which risks are being assumed and which protections must be built into the transaction. 2. Why is due diligence essential? A company may look financially attractive while still presenting material legal risks. For example, a company may have a very large customer portfolio but depend on a contract that can be terminated on a change of control. It may own technology presented as strategic without correctly holding the corresponding intellectual property rights. It may also show solid accounts while being exposed to: - a tax audit; - a commercial dispute; - an employment dispute; - an undeclared debt; - a fragile regulatory authorisation; - a real estate ownership issue; - a contractual breach. Due diligence makes these risks visible before the investor becomes irreversibly legally committed. 3. A step that has become particularly important for international investors The growing sophistication of investment transactions strengthens the role of legal counsel. International investors must today take into account not only Tunisian law, but also their own requirements in relation to: - governance; - compliance; - sanctions; - anti-corruption; - data protection; - environment; - social responsibility; - reporting; - beneficial ownership transparency. This trend forms part of a broader international evolution. In 2025, governments adopted 229 investment policy measures, a record level according to UNCTAD. Policies are also becoming more targeted on strategic sectors such as clean energy, digital infrastructure and advanced manufacturing. For the investor, this means that due diligence must be designed as a risk-management tool, not as a mere formality before the deal. 4. Tunisia remains a significant investment market Foreign investment dynamics confirm interest in the Tunisian market. According to UNCTAD, FDI inflows into Tunisia reached around USD 936 million in 2024, up 21.4% compared with 2023. The World Bank also estimates that net FDI represented about 1.6% of Tunisian GDP in 2025, compared with 1.4% in 2024. These figures should nevertheless be interpreted with caution: the existence of investment opportunities does not mean that all companies offer the same level of legal security. The larger the investment amount, the more thorough the prior analysis must be. 5. First step: verify the target's legal identity Due diligence begins with verifying the company's identity and structure. In particular, the following should be examined: - corporate form; - articles of association; - applicable legal register; - share capital; - capital breakdown; - identity of partners or shareholders; - managers; - beneficial owners; - representation powers. This step notably makes it possible to verify that the person claiming to sell an interest actually has the right to do so. 6. Review the capital history The investor must also reconstruct the history of capital ownership. In particular, the following should be looked for: - prior transfers; - capital increases; - capital reductions; - securities issuances; - shareholders' agreements; - promises to sell; - options; - preferential rights; - pledges. The objective is to determine whether the capital presented at the time of investment truly corresponds to the company's legal position. 7. Analyse governance Governance is another essential focus area. The audit should notably cover: - corporate bodies; - management powers; - minutes; - shareholder decisions; - delegations of authority; - related-party agreements; - potential conflicts of interest. For a financial investor, this analysis also helps assess the ability to put a new governance framework in place after the transaction. 8. Verify the company's assets The investor must then determine which assets actually belong to the target. The analysis may cover: Real estate assets - land; - buildings; - premises; - title deeds; - leases; - mortgages; - easements. Movable assets - equipment; - machinery; - vehicles; - inventory; - installations. Intangible assets - trademarks; - patents; - software; - databases; - domain names; - know-how; - licences. This verification is particularly important where assets form a significant part of the valuation. 9. Intellectual property: a frequently underestimated risk In technology, industrial or creative businesses, intellectual property may represent an essential part of value. In particular, the following should be checked: - who owns the trademarks; - who owns the software; - who owns the patents; - whether rights were properly transferred; - whether employees signed the necessary documents; - whether external contractors assigned their rights; - whether licences are valid; - whether rights are exploited in the relevant territories. An investor may thus discover that technology presented as a company asset legally belongs to its founder or to a contractor. Such a situation can have a direct impact on valuation. 10. Contracts: often at the heart of real value Effective due diligence must identify the contracts essential to the business. In particular, the following should be analysed: - customer contracts; - supplier contracts; - distribution agreements; - partnership arrangements; - licence agreements; - IT contracts; - financing agreements; - real estate contracts. The analysis should focus on clauses that may be triggered by the investment. The change-of-control clause is particularly important. It may allow a counterparty to: - require consent; - terminate the contract; - renegotiate certain terms; - exercise a specific option. 11. Tax risks Legal due diligence must be coordinated with tax due diligence. In particular, the following should be checked: - tax filings; - payments made; - tax audits; - assessments; - disputes; - tax incentives; - withholding taxes; - VAT; - other relevant tax obligations. A material tax risk may lead the investor to: - reduce the price; - request a specific warranty; - impose a condition precedent; - provide for a specific indemnity. 12. Employment risks The position of employees must also be reviewed. The audit may cover: - employment contracts; - remuneration; - benefits; - social security obligations; - leave; - disciplinary proceedings; - disputes; - key employees; - managers. Employment risks can become particularly significant where an acquisition is followed by a restructuring. The investor must therefore understand the potential legal consequences of the project before closing. 13. Identify existing and potential disputes Dispute analysis is an essential component of any due diligence. The following should be looked for: - court proceedings; - arbitrations; - commercial disputes; - employment disputes; - tax disputes; - administrative disputes; - formal notices; - significant claims. But future risks must also be sought. The absence of ongoing proceedings does not necessarily mean the absence of risk. For example, a contractual breach already identified but not yet subject to a claim may represent a potential liability. 14. Regulatory authorisations Some companies carry on activities subject to a specific regulatory framework. It is then necessary to check: - licences; - approvals; - authorisations; - certificates; - concessions; - environmental permits; - renewal obligations. The key question is: Will the authorisation remain valid after the investment or change of control? This question can be decisive in regulated sectors such as: - energy; - finance; - healthcare; - telecommunications; - transport; - infrastructure; - regulated services. 15. Data protection and digital compliance Digital compliance must now form part of many due diligence exercises. The investor may need to review: - databases; - personal data processing; - privacy policies; - contracts with processors; - security measures; - international data transfers; - cybersecurity incidents. For a digital business, these elements may be directly linked to company value. 16. Environment and ESG compliance For some transactions, environmental risks can have a significant financial impact. This concerns in particular: - industrial sites; - energy activities; - production facilities; - waste; - emissions; - environmental permits; - remediation liabilities. Institutional investors may also apply their own ESG criteria. Legal due diligence must therefore identify risks that could affect the company's ability to meet those requirements. 17. Due diligence and foreign investment in Tunisia Where a foreign investor invests in a Tunisian company, the analysis must also cover the framework applicable to the investment. In particular, the following should be examined: - the target's activity; - the relevant sector; - any authorisations; - applicable restrictions; - ownership structure; - transaction financing; - cash flows; - exit conditions. This analysis is essential to avoid structuring a transaction that would be difficult to complete or finance. 18. Due diligence in a Private Equity transaction For a Private Equity fund, due diligence follows a specific logic. The fund must be able to understand: the target's current position + future risks + value-creation opportunities + exit mechanisms. Due diligence should therefore also examine: - add-on acquisition potential; - governance; - key contracts; - expansion capacity; - regulatory risks; - restructuring options; - conditions for a future sale. Investment documentation must then reflect these conclusions. 19. The due diligence report: turning information into decisions A good due diligence report should not be a mere list of documents reviewed. It must enable the decision-maker to understand: Low risk No particular action is required. Moderate risk A regularisation or contractual protection may be recommended. High risk The risk may justify a price reduction, a condition precedent or a specific warranty. Critical risk The risk may call the transaction itself into question. This approach allows the fund, investor or acquiring group to take a more rational decision. 20. How are identified risks addressed? Discovering an issue does not necessarily mean the investment must be abandoned. Legal counsel can propose different mechanisms. Price reduction The identified risk is reflected in the valuation. Condition precedent The transaction completes only if the issue is resolved. Specific warranty The seller warrants a particular risk. Indemnity The seller undertakes to indemnify the buyer if the risk materialises. Escrow Part of the price may be held temporarily to cover certain risks. Post-closing undertaking The seller or the target undertakes to carry out certain actions after the acquisition. 21. Due diligence directly shapes the acquisition agreement This is one of the most important points. Due diligence must not remain in a report separate from the contract. Its conclusions must influence: - price; - warranties; - conditions precedent; - seller representations; - indemnities; - pre-closing obligations; - post-closing undertakings; - dispute resolution mechanisms. Due diligence is therefore one of the foundations of the legal negotiation of the transaction. 22. How long does due diligence take? Duration depends on several factors: - company size; - number of subsidiaries; - sector; - number of contracts; - regulatory complexity; - legal history; - volume of documents; - national or international nature of the transaction. A small company may be subject to a relatively targeted review. A transaction involving an industrial group, several subsidiaries or regulated activities generally requires a much deeper analysis. The objective is not, however, to review every document with the same depth. Material risks capable of affecting the investment decision must be identified. 23. Key documents to request A legal data room should notably contain, depending on the nature of the transaction: Corporate - articles of association; - shareholders' register; - minutes; - shareholders' agreements; - capital-related documents. Contracts - key customer contracts; - suppliers; - partnerships; - licences; - financings. Employment - employment contracts; - social documents; - disputes. Litigation - proceedings; - formal notices; - decisions; - arbitrations. Intellectual Property - trademarks; - patents; - licences; - software. Regulatory - licences; - authorisations; - approvals. Real Estate - title deeds; - leases; - mortgages; - permits. Compliance - internal policies; - data protection; - compliance procedures. 24. Red flags to watch Certain situations should immediately attract the investor's attention. For example: Strong dependence on a single customer. A major contract without a clear renewal clause. Intellectual property held by the founder. Licences due to expire soon. Significant unprovisioned disputes. Material bank guarantees. Essential assets not properly documented. Key employees without suitable contracts. A complex capital structure. Insufficiently documented related-party transactions. These elements do not necessarily mean that the investment must be abandoned. They indicate that the transaction must be better structured and better protected. 25. Legal due diligence and company valuation Due diligence can have a direct impact on valuation. Take a simplified example. A company is valued on the basis of significant revenue growth. Due diligence nevertheless reveals that 40% of that revenue comes from a contract that could be terminated following a change of control. The investor then has information that may alter the economic analysis. The investor may: - renegotiate the valuation; - request renewal of the contract before closing; - condition the transaction on obtaining the customer's consent; - request a specific warranty. Legal analysis thus becomes directly financial. 26. Due diligence and exit strategy Due diligence should also be designed with a long-term perspective. An investor planning to sell the interest in five years should already ask: Will the current legal structure facilitate the next transaction? It may notably be necessary to anticipate: - governance; - intellectual property; - international contracts; - shareholder rights; - exit mechanisms; - compliance; - corporate documentation. A company that is legally well structured is generally easier to present to a future buyer. 27. Why engage Tunisian legal counsel? An international transaction often requires several layers of advice. Tunisian legal counsel notably brings knowledge of: - Tunisian law; - local practices; - administrative procedures; - how authorities operate; - contractual customs; - regulatory risks; - local governance issues. For a foreign investor, this expertise complements the work of international counsel. The objective is not to replace the fund's or group's counsel, but to have local expertise capable of translating Tunisian risks concretely into the overall transaction strategy. 28. ANILF: your legal counsel for investment transactions in Tunisia ANILF assists investors, Private Equity funds, international groups and companies in their investment transactions in Tunisia. Our support may notably include: - legal due diligence; - corporate audit; - contract audit; - regulatory audit; - real estate audit; - employment audit; - intellectual property; - data protection; - dispute analysis; - foreign investment; - acquisitions and equity investments; - Private Equity; - negotiation of investment agreements; - asset and liability warranties; - shareholders' agreements; - governance; - restructuring transactions. Are you considering investing in a Tunisian company? Before signing a letter of intent, an investment agreement or an acquisition contract, ANILF can help you identify legal risks, assess their impact and define appropriate contractual protections. Conclusion Legal due diligence is today a fundamental step in any significant investment transaction in Tunisia. In an international context where investors are becoming more selective and investment policies increasingly target strategic sectors, control of legal risks becomes a genuine decision factor. For Tunisia, available data show that foreign investment remains significant, with FDI inflows of USD 936 million in 2024, up more than 21%, while net FDI is estimated at 1.6% of GDP in 2025 by the World Bank. But behind every investment opportunity lies an essential question: which risks is the investor really accepting? Due diligence provides a documented answer to that question. It makes it possible to identify risks, measure their impact, negotiate price and warranties and, above all, turn legal information into a decision-making and investment-protection tool. For an international investor, a fund or a group seeking to acquire a company in Tunisia, legal due diligence is therefore not an incidental expense: it is an essential component of protecting invested capital.