Counterparty check: how to quickly assess a partner’s reliability

On paper, almost all counterparties look equally respectable: there is an extract from the register, a nice website, and a manager confidently talking about their “market reputation”. The problems come later: goods are not delivered, services are not provided, money gets stuck, and the tax authorities question whether the transactions were real and deny expenses or VAT credit. In most such cases, businesses honestly admit: there was no systematic check of the counterparty before the deal – at best, “we talked and looked them up on the internet”.

Counterparty checks are not about distrust – they are basic business hygiene. A few right steps before signing a contract can protect you from non‑payments, litigation, and tax claims. At WINNER, we see every day how minimal due diligence on a partner before the deal saves clients far more than the cost of the check itself.

Why you should check counterparties before a deal

When you sign a contract with a company or a sole proprietor (FOP), you receive not only potential income but also a package of risks, including:

• risk of non‑payment or delayed payment;
• risk of non‑performance or purely formal performance with poor quality;
• risk of tax claims about “fictitious” transactions and lack of real business purpose;
• risk of working with “shell” companies that the tax authorities treat as problematic.

The State Tax Service actively uses a risk‑based approach: it analyses supply chains, financial indicators, and the track record of your partner. If your counterparty already has a “trail” of problems, it is very likely that you will also end up in the audit focus. This is why the question “who we are working with” today directly affects the safety of your business tomorrow.

How we at WINNER check counterparties

We design counterparty checks so that the business owner receives not just a stack of extracts, but a clear answer: whether to work with this partner, on what terms, and with which safeguards.

Typically, the check includes:

• Analysis of registration data.We verify the data in state registers: status, beneficial owners, types of activity, tax status, and any restrictions.
• Financial and tax indicators.We review public information on turnovers, tax history, the presence of tax debt, and participation in risky schemes (to the extent visible from open sources and practice).
• Court cases and enforcement proceedings.We check whether the company is involved in multiple disputes, especially as a defendant in cases over non‑payment, poor‑quality work, or debt recovery.
• Reputation background.We analyse mentions in the media, open sources, and professional communities. Sometimes one high‑profile case says more than dozens of dry extracts.
• Internal red flags.We assess the terms on which you are offered to work: an unrealistically good price, pressure to sign quickly, reluctance to provide standard documents, unusual payment arrangements – all of these are indicators of elevated risk.

The result is a concise but substantive conclusion: risk level, critical findings, and recommended protective clauses for the contract (advance payments, security deposits, penalties, staged settlements, etc.).

How the check affects your contract

A counterparty check only makes sense when its results are reflected in the contract. Therefore, at WINNER we do not simply say “this is a bad/ok counterparty” – we help you reshape the commercial terms to minimise risks.

For example:

• if the counterparty is financially unstable, we suggest staged payments, security deposits, or bank guarantees;
• if the litigation history looks “alarming”, we tighten liability provisions and set a detailed procedure for acceptance of goods/works;
• if there are tax risks, we may recommend changing the transaction structure or abandoning the deal altogether.

This approach allows your business not only to “know about the risks” but to actively manage them by embedding protection directly into contractual relations.

Why choose WINNER

WINNER Law Firm is a team of about 20 attorneys and lawyers who work every day with contracts, tax risks, and commercial disputes. We see counterparties not only “on paper” but also in real cases: who fails to pay, who drags things out, who “disappears” after the first problem. That is why our conclusions are always grounded in practice, not only in formal registers.

We help businesses set up a simple and effective process: before every material transaction, your managers send us the counterparty’s details, we run an express check, and return a conclusion with the risk level and recommendations. This is far cheaper than litigating over a debt for years or explaining to the tax authorities why you trusted a “problem” partner. If you want to work with counterparties confidently rather than blindly, contact WINNER – we will set up a partner‑screening system that actually reduces risks instead of just filling another folder with documents.

Author: Ihor Yasko, Managing Partner of the Law Firm “WINNER”, PhD in Law.