Due Diligence Request List
This post provides a sample due diligence request list that can be used in connection with the financing or acquisition of a private company.
1. Actions and Minutes
(a) Shareholder/Member Actions. Copies of all shareholder/member actions and meeting minutes.
(b) Board/Manager Actions. Copies of all board/manager actions and meetings minutes.
2. Organizational Documents
(a) Legal Names; Etc. Full legal name, address of the chief executive office (and, if different, the principal place of business), state of organization and federal tax identification number and any change of name, address or corporate structure.
(b) Certificate of Formation/Articles of Organization. A copy of the Company's Certificate of Incorporation, Certificate of Formation or Articles of Organization, as applicable, including any amendments thereto.
(c) Bylaws/Operating Agreement. A copy of the Company’s Bylaws or Operating Agreement, as applicable, including any amendments thereto.
(d) Subsidiaries. Organizational chart reflecting all of the Company’s subsidiaries.
(e) Qualifications. A list of each jurisdiction in which the Company and each of its subsidiaries is qualified to do business as a foreign entity, owns or leases real property or is otherwise operating, and copies of the applicable state qualification filings.
3. Equity Records and Equityholder Agreements
(a) Cap Table. Current detailed (by holder) fully diluted cap table of the Company and each of its subsidiaries.
(b) Vesting. A summary of the vesting schedules of any shares of capital stock of the Company subject to vesting, including any acceleration of vesting provisions.
(c) Purchase/Sale Agreements. Agreements relating to the purchase, repurchase, sale or issuance of the Company’s securities (other than those provided below).
(d) Investor Agreements. The Company’s current investor agreements (investor rights agreement, right of first refusal and co-sale agreement, voting agreement, etc.).
(e) Voting. Agreements relating to voting of the Company’s securities not provided pursuant to 3(d) above.
(f) Preemptive and Preferential Rights. Agreements relating to preemptive or other preferential rights to acquire the Company’s securities, including rights of first refusal, not provided pursuant to 3(d) above.
(g) Registration Rights. Agreements relating to registration rights not provided pursuant to 3(d) above.
(h) Other Equity Agreements. Any other agreements with or among equity holders of the Company not provided pursuant to 3(c) through 3(g) above.
(i) Subsidiaries. Agreements pertaining to the issuance of securities of the Company’s subsidiaries.
(j) Securities Exemption Qualification. Evidence of qualification or exemption under applicable federal and state blue sky laws for issuance or transfer of securities of the Company.
4. Legal and Regulatory
(a) Litigation. All documents and correspondence relating to any pending litigation, threatened litigation or disputes that could potentially lead to litigation involving the Company, its executive officers or its directors.
(b) Judgments or Other Decrees. Any consent decrees, injunctions, judgments, other decrees or orders, settlement agreements or similar matters.
(c) Government Communications. All material communications to and all filings with domestic and foreign governmental agencies relating to the Company (including the Securities and Exchange Commission, state securities agencies, the Internal Revenue Service and any state or foreign taxing authority), including permits and consents.
(d) Government Regulations. A list of all federal, state and foreign agencies which license, regulate, inspect or register the Company and its subsidiaries and any of their activities.
(e) Government Violations. Any reports, notices or correspondence relating to any purported violation or infringement by the Company of government regulations, including the areas of insurance, equal opportunity, occupational safety and health and environmental protection, and copies of all other material correspondence with federal, state or other regulatory agencies.
5. Intellectual Property
(a) Employee and Consultant Assignment Agreements. Forms and copies of proprietary information and invention agreements and/or consulting agreements (as applicable) signed by past or present employees and consultants of the Company.
(b) Employees Not Subject to Assignment Agreement. A list of any employees or consultants of the Company who have not signed a form of proprietary information agreement or consulting agreement (as applicable) in the form provided pursuant to 5(a) above, including a list of any periods of time during which employees or consultants performed services for the Company while not bound by such agreements.
(c) Allegations of Infringement. Any correspondence or documents relating to allegations of infringement of the proprietary rights of others by the Company, or allegations by the Company of infringement of its proprietary rights.
(d) Licenses. Any licenses or agreements of any kind with respect to intellectual property to which the Company is a party (including open source licenses), other than (non-open source licenses) or agreements pertaining to “off-the-shelf” or standard products.
(e) IP Transfer Documents. Any documentation relating to the transfer of any technology or intellectual property to or from the Company.
(f) Open Source Software. A list of all “free” or “open source” software that is used or distributed by the Company (alone or incorporated, integrated, or bundled with or into any Company products), or for which the Company plans to do any of the foregoing.
(g) Open Source Licenses. Any obligation or condition (under “open source” licenses or otherwise) that would require that any products, software or technology developed by or for the Company: (i) be disclosed, distributed, or made available in source code form; (ii) be licensed with the permission to create derivative works; or (iii) be redistributable at no charge.
(h) Patents, Trademarks and Copyrights. A list of patents, copyrights and trademarks (and applications therefor) of the Company.
6. Management, Employees and Consultants
(a) Officers; Directors; Key Employees. A list of officers, directors and key employees. If any officers or key employees are not currently devoting 100% of their business time to the Company, please note them on this list.
(b) Offer Letter. Forms of offer letter used by the Company.
(c) Agreements. Any agreements, understandings or proposed transactions between the Company and any of its officers, directors and key employees not otherwise provided above, including employment agreements or offer letters currently in effect.
(d) Profit-Sharing. Employee benefit and profit-sharing plans and arrangements, including stock option, profit interest, stock purchase, deferred compensation, bonus, severance, change in control plans or arrangements, and related forms of agreements.
(e) Accrued Salary and Reimbursable Expenses. A list and breakdown of all outstanding accrued salary, paid time off and reimbursable expenses as of a recent date.
(f) Insurance Policies. Copies of any “Key Person” or “D&O” insurance policies.
(g) Consultants. A list of all consultants of the Company and copies of all consulting agreements with the Company.
7. Debt Financing
(a) Financing Agreements. All debt instruments and credit agreements entered into by the Company, including lease financing agreements, that are currently in effect.
(b) Guarantees. Any guarantees of third party obligations by the Company that are currently in effect.
8. Property
(a) Owned. Summary of property owned, together with copies of mortgages and deeds on owned property, plant and equipment.
(b) Leased. Schedule and copies of leases and related agreements for all property, plant and equipment leased by or to the Company with rental, expiration and renewal terms.
(c) Appraisals. Appraisal reports on owned property, plant and equipment.
(d) Insurance. Copies of insurance policies on all property.
9. Other Agreements (not otherwise provided above)
(a) Forms of Agreements. Standard forms of agreements used by the Company.
(b) Joint Ventures and Partnerships. All joint venture and partnership agreements that the Company has entered into.
(c) Management Agreements. All management agreements.
(d) Necessary Consents. Agreements requiring consents or approvals in connection with the contemplated transaction.
(e) Proposed Acquisition Documents. Agreements, letters of intent or term sheets regarding any proposed acquisition by the Company of any company, business or material amount of assets.
(f) Other Material Agreements. Any other agreements material to the business of the Company or outside the ordinary course of business.
(g) Customer List. A list of customers and suppliers by annual revenue amount and revenue/product type.
(h) Restrictive Agreements. Any contract restricting the ability of the Company to compete in any line of business with any person or entity, or committing the Company to continue in any line of business.
10. Miscellaneous
(a) 409A. The Company’s 409A valuations.
(b) Financial Condition. Any other reports and studies prepared with respect to the Company's business or financial condition.
(c) Financial Reports. Most recent year-end financial statements (audited, if audited financial statements are available) and latest monthly and year-to-date financial statements.
(d) Tax Returns. Federal, state, local and foreign tax returns and reports (including income, property, payroll, excise, sale and use taxes) for the last three fiscal years.
(e) Audit Information. All information (including audit reports, revenue reports, settlement documents, correspondence, legal opinions and proposed deficiencies) related to any audit of any return or report (and any administrative or judicial dispute with respect thereto) filed by or on behalf of the Company for the last three fiscal years or related to any pending audits or administrative or judicial disputes relating to taxes for any open periods.
(f) Tax Opinion. Any tax opinion letters, memoranda, or studies prepared by or on behalf of the Company during the last three fiscal years.
(g) Revenue Recognition. Documentation around revenue recognition policies.
(h) Operating Documents. Most recent annual operating plan, annual budget, business plan or similar document of the Company.
Scannavino Law LLP is a boutique law firm based in New York City offering legal and strategic advice to forward-thinking entrepreneurs, startup companies, and startup investors. Founded by former Big Law lawyers with a range of experience in corporate law and business transactions, the firm serves its clients by blending world-class service with entrepreneurial perspective. Check us out at www.scannavinolaw.com.
This publication is for general information purposes only. The information in this publication should not be construed as legal advice or legal opinions, is not a substitute for fact-specific legal counsel, does not necessarily represent the views of the firm or its clients, and is not intended to create a lawyer-client relationship. This publication may constitute attorney advertising in some jurisdictions.