Virtual Data Rooms 101: What You Need to Know

Virtual data rooms (VDRs) are copyrighted extranets that serve as an online repository of data. In simple terms, it's an online warehouse that houses your company's essential documents. The documents stored in this online warehouse are highly classified, highly private, and highly valued. People prefer to store these documents in such an avenue to keep it confidential.

Who Can Use Virtual Data Rooms?

Anyone who is in the business industry can use a virtual data room. It is the evolution of keeping private and highly classified documents. It is no longer ideal for getting a physical data room as this serves as an essential tool, especially in business deals.
Firms that are into private equity and venture capital can highly benefit from the use of virtual data rooms.
How Does it Work?
When you create a virtual room, you can now place all documents that are deemed highly valuable by the company in this online data room. Pre-approved individuals can get access to these documents. You can access it online, and the person is given a secure user identification number and a protected password.
What is the Use of Virtual Data Rooms?
1. Merger and Acquisition
Merge and acquisition entail volumes and volumes of documents from research. These data can be stored in VDRs. A company considering a purchase offer can give access to the potential buyer to sensitive and confidential data found in virtual data rooms. If in case the deal doesn’t push through, a company terminates its access.
2. Audits
There are instances wherein a third party will have to review your company’s data. Accountants and auditors may need to take a look at your company’s records. Your team can provide those requested documents without compromising the confidentiality of your data. VDRs allow document sharing and facilitate it virtually.
Why Use VDRs?
It is more cost-efficient. Your company gets to save more compared to having the standard physical data room.
VDRs are also more secure. Its level of security is much higher compared to a place that could be easily accessed by a person.
It is also more comfortable to update and organize documents in a VDR. It could also provide users access to the secured information anywhere at any given time of day.
What Should You Put in the Virtual Data Rooms?
All materials in the business are essential. However, we need to store some documents in secure avenues. Primary corporate documents are valuable. These documents include Certificates of Incorporation, Bylaws, and Amendments. You should also safely store the list of Subsidiaries and ownership, along with the shareholder minutes and consents.
Other relevant documents include business permits, business license, and record of jurisdictions where your company is legally allowed to do business.
Your financial and tax matters are essential and should be stored in a VDR. These are volumes of documents that include audited and unaudited financial statements. Monthly and quarterly financials are also crucial and must be put inside the virtual data room. Also, you have to put the income tax returns and other tax filings in the VDR.
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