Virtual data room software is an encrypted repository that allows users to examine confidential information in a safe environment during due diligence and other business transactions. It provides a high level of security protocols that are not available on generic file-sharing platforms. This includes granular permissions for users, encryption during transit and in rest with two-factor authentication, the ability to watermark content, and audit trails that show logins uploads, downloads, and logins. These features minimize the threat of theft of intellectual property and unauthorised access to sensitive financial and corporate information that could jeopardize transactions or result in lawsuits.
The most commonly used use of the virtual data room is to share IP documents during M&A due diligence with outside parties, such as potential buyers or licensing partners. The ability to scale virtual data rooms also makes them useful for sharing large or confidential documents with internal teams and others. They also facilitate collaboration with auditors, outside counsels, or consultants.
Using a virtual data room for bankruptcy or restructuring due diligence is an excellent method of streamlining the process with outside participants. These kinds of transactions typically require reviews of a company’s prior financial performance and debt, as well as accounting reports such as cash flow statements capital expenditure budgets, legal contracts and liens, as well as customer credit reports. A secure data room system is required to stop unauthorized access to these vital documents and ensure the integrity of the transaction.
