Sell | 10 October 2017

What is a due diligence questionnaire?

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An investor in, or buyer of, your company or its business will want to complete a thorough review of it and its records (also known as “due diligence”) before making an investment in it or buying it from you. They will probably send you a due diligence questionnaire (also known as a DDQ or due diligence checklist) to extract the information from you. It will improve your chances of getting a deal done if you can respond to the questionnaire promptly and accurately.

As we have mentioned earlier (please see I have my company. Now what?), it is never too early to prepare for a potential investor or buyer who may come knocking at your door: consider storing your business documents and other records in a logical order. We have set out below a list of items commonly requested by potential investors or buyers.

Company records:

•  Certificate of incorporation

•  Articles of Association (including any amendments)

•  Director consents

•  Shareholder consents

•  Minutes of meetings of directors and shareholders (and/or any written resolutions)

•  List of directors and officers

•  Shareholders’ Agreement (if any)

Shares and other securities:

•  Capitalisation table i.e. a list of shareholders and option holders (if you’d like to know more about capitalisation tables, please see our article {here} {link to What is a cap table? article})

•  Documentation relating to the purchase or acquisition of securities (e.g. options, convertible notes, SAFEs, KISSes)

•  Documentation relating to previous share issues and a summary of any vesting arrangements

•  Copies of any filings relating to shares and securities which have been made to the companies’ registration authority

•  Founders’ Agreement, Shareholders’ Agreement, voting arrangements documents or any other agreement relating to the company’s securities

Agreements:

Any agreement or proposed arrangement to which the company is a party and will have obligations to, or receive payment from, another party:

•  Supplier, distributor, sales, manufacturing activities

•  Property sale and purchase, lease or sub-lease

•  Mortgages, loans and other encumbrances over the company’s assets

•  Loans or other advances made by the company

•  Other financing arrangements including borrowing, guarantees, equipment leases, rent-to-own

•  Any arrangements with any of its officers, directors, or affiliates (e.g., advisory agreements)

•  Employee offer letters and agreements and consultancy agreements

•  Employee share option plans and other benefits (e.g. insurance policies)

•  Insurance policies

•  Confidentiality agreements

•  Sale and purchase agreements

•  Joint venture, research and development, co-operation agreements

•  Any other agreement which is considered material to your business

Intellectual Property:

•  List of products and services (including those in development phase)

•  Internal procedure for identifying and protecting innovations

•  Licences relating to the company’s copyrighted works, patents, trade marks, trade secrets or other proprietary rights

•  Registration records

•  Agreements with current or former employees relating to use of the company’s information

Litigation:

•  Details of any pending or threatened proceedings, claims or investigations

•  Allegations that the company has infringed others’ proprietary rights

•  Settlement agreements

•  Judgements or orders involving the company, its directors or officers

•  Requests from federal, emirate or other government entity officials (e.g. Ministry of Labour, public health and safety department)

Financial:

•  Financial statements

•  Audit reports