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Legal Due Diligence Checklist

Corporate Organization

• Organizational chart showing the corporate structure of the target, subsidiaries, and affiliates.
• Joint venture, partnership, and other agreements involving the sharing of profits or technology.
• Governing documents for the Target, subsidiaries, and affiliates. Include Articles of Incorporation, Articles of Organization, Bylaws, Operating/LLC Agreement, Articles of Association, etc.
• List of all jurisdictions in which the Target is licensed to do business.
• Information for all board, shareholder, and member meetings.
• Contracts relating to any material acquisitions, equity divestitures, assets.

Management

• All related party transactions, including review/approval procedures applicable thereto.
• Professional biography for each member of the team and any other key employees.
• Professional biography for each member of the board.

Capital Structure

• Analysis showing the number of shares outstanding.
• Documentation evidencing each issuance of private equity.
• Summary of warrants, convertible notes, and any right entitling the holder to obtain equity.
• Copy of outstanding debt instruments.
• Shares owned by each shareholder for the target, branches, and affiliates.

Legal

• Summary of material litigation.
• Summary of permits, licenses, and other authorizations including any required export control licenses.
• Copies of material contracts that are terminable upon a change of control or other corporate transaction.
• Copies of agreements or instruments that place restrictions or encumbrances on assets.
• Contracts that restrict the target's right to conduct its business.
• Contracts with obligations such as covenants and indemnification.
• Indemnification agreements between the target and any officers, directors or agents thereof.
• Summary of the target's compliance program and copies of all policies, procedures and other related documentation.
• Confirm officers, or significant shareholders is subject to any of the Bad Actor disqualifications.

• Confirm that the firm is not restricted from doing business under OFAC regulations or similar.
• Confirm whether the target has any direct or indirect presence and/or other engagements.
• Summary of regulations applicable and/or its business, and anticipated changes
• Copies of any letters with any regulatory agencies or authorities.
• Summary of product recalls conducted and all material warranty claims brought.

Real Estate

• List of the address and description of each property development, office, warehouse or other facility operated or maintained by the target.
• Summary of deeds with respect to all owned real estate. Include copies of all related title papers, title insurance policies, appraisals and surveys.
• Lease agreements and agreements related to the purchase or sale of real property.

Commercial Due Diligence Checklist

Suppliers

• List of the top 15 suppliers for each of the past 3 years.
• Material supplier and subcontractor contracts.

• Summary of the policies and procedures produced when evaluating and onboarding any new supplier or contractor.

Marketing

• Copies of any strategic, marketing, or advertising plans prepared for the target.
• Summary of anticipated new products and/or product improvements.
• Copies of all brochures, presentations, sales sheet, and other advertising/marketing materials.
• Product descriptions for all material products and product lines. Summary of all ongoing RD projects, including an estimated timeline for completion thereof.
• Summary of all marketing risks and opportunities.

Commercial Policies

• Copies of policies and procedures related to pricing, credits, returns, warranty claims, etc.

Customers

• List of the top 25 customers for each of the past 3 years, including revenue.
• List of customers that have stopped doing business with the company.

• List of all material sales channel partners for each of the past 3 years, including revenue.
• Breakdown of sales and gross profits by Product Type; Geography, Sales Channel.
• Copies of all material customer contracts.
• Copies of all material contracts that have remaining terms longer than one year.
• Copies of all contracts with material sales channel partners. Copies of all contracts with government customers.

Financial Due Diligence Checklist

Accounting

• Financial statements for the target and branches.
• Description of off-balance sheet/statement of financial position items, liabilities or obligations of any nature.
• Schedule of any contingent liabilities not disclosed or referred to in the financial statements.
• Detailed schedule of the components of all prepaid expenses and deposits.
• Copies of any letters regarding the target's accounting controls, including all Management Representation Letters.
• Key accounting policies necessary to the understanding of the financial statements.
• Material changes to accounting policies adopted.
• Budgets and operating plans, and financial projections prepared. Unaudited financial statements.

Finance

• Summary of any cash management controls and practices. Investment policies.
• Hedging policies, including copies of related contracts or instruments.
• Report reflecting all aged accounts receivable trial balances for target.
• Summary of the target's inventory costing system and other procedures and policies related to inventory.
• Debts, agreements or arrangements that are expected to result in a loss to the target.
• Current listing of standby letters of credit, performance bonds, performance guarantees.
• Copies of recent bank reconciliations and bank statements.

Operations

• Summary of all material capital expenditure projects.
• Summary of all capital expenditures planned in the next 12 months.
• Asset register and/or copy of latest physical inventory of equipment and assets.
• Schedule of equipment split by capital vs. operating lease.

Insurance

• Summary of all current insurance coverages and copies of all policy documents related thereto.
• Summary of claims made against any insurance policy.

Human Resources (HR) Due Diligence Checklist

Human Resources Agreements

• Copies of all employment and severance agreements and indicate those affected by the transaction.
• Copies of all consulting agreements.
• Agreements relating to any compensation arrangements.
• Collective bargaining agreements, non-competition, nondisclosure or similar agreements.
• Summary of any current recruitment initiatives, including any financial commitments related thereto.

Benefits

• Summary of all benefits and a copy of the target's compensation policy

• Details of bonus or other profit-related schemes and details of beneficiaries/participants.
• Copies of plan documents for all benefit plans.
• Summary of incentive stock option plans.
• Summary of outstanding stock option awards and copies of any award documents related.
• List and summary of all pension plans.

General HR

• Summary of litigation against the target brought by any current or former employee.
• Description of any court judgement or current employment tribunal award in respect of any employee dispute.
• Details of any disciplinary proceedings taken against an employee or grievance brought by an employee.
• Summary of any investigations and proceedings by authorities relating to employment matters.
• Headcount by function and location.
• Schedule of any employees suspended - including reasons for suspension and salary implications.
• Schedule of employees.
• Summary of absence from work due to disability, long-term illness, or otherwise.
• Schedule of employees covered by any disability legislation.

HR Policies

• Copies of all employee manuals and policies.

• Target's hiring practices and policies, including use of background checks, checks of immigration status.
• Summary of any changes.
• Schedule of any loans and all sums owed.

Intellectual Property Due Diligence Checklist

Intellectual Property Registrations

• Summary of the target's registered trademarks and patents
• Schedule of all websites and domains owned.

Intellectual Property Contracts

• Agreements under which the target is granted the right to use IP owned by a third party.
• Agreements under which a third party is granted the right to use IP owned.
• Summary of any IP that is not solely owned by the Target.

Intellectual Property Litigation

• Summary of any past or current instances where any third party actually or allegedly infringed on the target's IP.
• Summary of any restrictions to which IP assets of the target are subject.

• Summary of all IP litigation in which the Target is or has been involved.

Intellectual Property Development

• Summary of process for generating/developing, recognizing, capturing, and protecting IP assets.

Information Technology Due Diligence Checklist

IT Administration

• Details of any current and planned IT initiatives/key projects.
• Summary of key IT resources (hardware/software/people).
• Policies and practices of the purchase and maintenance of software.
• Summary of all material software utilized by the target.
• Policies and practices regarding the purchase and maintenance of IT hardware.
• Summary of material hardware utilized by the target, including the physical location.
• Diagram of technical architecture including servers, storage devices, operating systems and databases.
• Description of the networking systems and specific hardware configurations.
• Summary of any vendor support or other support services to which the target is entitled.

• Summary of annual costs associated with maintenance of IT hardware, including hardware upgrades and replacements.
• Material contracts related to software and IT services.
• Summary of services provided by all external IT contractors/consultants.
• Capacity for growth in the target's current IT environment.
• Summary of how the target acquired technology and the role of IT/technology in strategic planning
• Description of the target's support/help desk effectiveness and approach.
• Describe the level of automation and web or internet facing applications.

IT Security

• Detailed summary of the key security protocols.
• Description of backups and disaster recovery policies and procedures.
• Detailed description of data privacy policies and procedures.
• Summary of all personal and/or sensitive information.
• Target's policies and procedures regarding data storage and data encryption.
• Summary of any issues, including loss of confidential information, inappropriate or malicious content, etc.
• Results of stress test analysis, including the resolution of any issues identified.
• Details about monitoring measures/tests to ensure technical safeguards are working as expected.
• Summary of any logged security issues.

• Summary of any anti-virus and anti-malware protections.
• Policies and procedures utilized by the target to manage mobile device security
• Description of any cyber attacks / intrusions.

Environmental, Health and Safety (EH&S) Due Diligence Checklist

Environmental

• All environmental investigations, citations, or notices of violation.
• All litigation in which the target has been involved / related to environmental matters.
• Information related to past or present enforcement actions against any premises owned by the target.
• All information regarding generation, treatment, storage and disposition of hazardous substances.
• Summary of any material financial losses.
• Copies of environmental studies, assessments and surveys in respect of land.
• Summary of all dedicated reserves for management of environmental liabilities.
• Copies of any material correspondence with any environmental regulatory agencies.
• Results of all environmental audits.
• Risks arising from arrangements for the treatment or disposal of materials, liquids, or gases used by the target.

• Copies of permits and other governmental approvals relating to environmental matters.
• Description of any existing ground or underground storage tanks.

Health & Safety

• All investigations, citations, or notices of violation related to employee health and human services.
• All emergency response policies and procedures.
• Summary of all current or past litigation brought against the target by any current or former employee.
• Results of all health and safety audits, including the resolution of any findings.
• Accidents within the last 5 years.
• Summary of all workers' compensation and health care.
• Copies of all material safety data sheets for materials.