Prior to an investment or sale transaction, prospective investors or acquirers will complete a comprehensive review of the target business and its records. A company’s ability to quickly and completely respond to due diligence requests increases the likelihood that the deal at hand will close on favorable terms (or close at all).
Prepare now for major transactions by maintaining the company records in the below due diligence checklist.
Corporate Records
1. Certificate or Articles of Incorporation, including all amendments.
2. Bylaws, including all amendments.
3. Written consents of directors and stockholders.
4. Minutes of directors’ and stockholders’ meetings.
Securities
1. A list of the company’s stockholders and option holders (i.e. capitalization table).
2. Copies of options, warrants, or other agreements that provide for purchase or acquisition of company securities.
3. Copies of all agreements relating to the company’s past stock issuances and a summary of any related vesting schedules.
4. Copies of Form Ds, Blue Sky filings, and any other documents relating to compliance with applicable state and federal securities laws.
5. Any other documents or agreements related to the sale or purchase of securities (e.g., investor rights agreements and voting agreements).
Agreements
1. Any agreements or proposed transactions to which the company is a party that involve obligations of, or payments to, the company.
2. Contracts with suppliers, distributors, customers or manufacturers.
3. Property purchase, lease, or sublease agreements.
4. Documents relating to indebtedness for money borrowed, guaranties, equipment leases or any similar liabilities incurred by the company.
5. Mortgages, liens, loans and encumbrances on the company’s property or assets.
6. Loans or advances made by the company.
7. Any agreements, understandings or proposed transactions between the company and any of its officers, directors, employees or affiliates (e.g., employment agreements).
8. Copies of proprietary information and invention assignment agreements signed by all employees and contractors.
9. Employee offer letters.
10. Consulting or independent contractor agreements.
11. A summary of insurance policies, or certificates of insurance, that the company holds or benefits from.
12. Employee benefit plans (e.g. stock option plans, pension plans and insurance plans).
13. Acquisition agreements.
14. Confidentiality agreements.
15. Agreements with competitors, including non-competition agreements.
16. Partnership, joint venture, association, research and development, and technical cooperation agreements.
17. Any other agreement material to the company.
Intellectual Property
1. List of principal products (including products being developed) in each line of business, with short descriptions of the products, respective prices and stage of development.
2. Company procedures for identifying, harvesting and protecting inventions.
3. Licenses or agreements related to the company’s or others’ patent, copyright, trade secret or other proprietary rights, proprietary information or technology.
4. Issued patents, patent applications, and foreign patent filings.
5. All prior art patent searches, conclusions, reports and opinions that the company possesses concerning the infringement of third party patents by its products and the validity of such third party patents.
6. Federal, state and foreign trademark registrations and pending applications.
7. Documents relating to agreements dealing with trademarks.
8. Copyright registration records.
9. Restrictions on use of the copyrights or third party ownership rights.
10. Trade secrets, whether the company is licensor or licensee (e.g., license, secrecy, or non-analysis).
11. Agreements with the company’s current and former employers relating to use of the company’s proprietary information.
12. Reseller agreements.
Litigation
1. Pending or threatened lawsuits, actions, or investigations.
2. Allegations of the company’s infringement of the proprietary rights of others.
3. Settlement agreements.
4. Inquiries from federal, state or other government officials (e.g., tax, environmental, occupational safety and hazard).
5. Judgments or orders involving the company, its officers, or its directors.
Miscellaneous
1. Most recent financial statements.
2. List of officers and directors.