Generic Due Diligence Questionaire
Checklist
1. Companies and shares
1.1 Group diagram showing all legal entities and the Group’s percentage of shareholding in each legal entity.
1.2 List of the shareholders and percentage of ownership in each legal entity.
1.3 List of stakes / interests in other companies, associations, joint ventures, public or private partnerships.
1.4 Current certificate of registration / incorporation and information of amendments, which have not been registered.
1.5 Articles of association or by-laws.
1.6 Share certificates, register of transfer of shares, transfer documents.
1.7 The latest official register of ownership / shareholders.
1.8 All shareholders’ agreements, voting agreements and similar agreements with respect to the company.
1.9 All other agreements limiting the transferability of the shares in the company (pre-emption rights and similar rights) and/or limiting the shareholders’ voting rights.
1.10 All agreements and description of details regarding issue of shares, convertible debt instruments, warrants, options, bonds or other financial instruments, including details of any outstanding uncompleted and unexercised instruments.
1.11 Details on any liens, mortgages, charges or encumbrances over the shares of the company.
1.12 All contracts and description of details with respect to acquisitions, divestments or mergers over the last three years.
Minutes of meeting
1.13 The minutes from of shareholders meetings for the last three years.
1.14 The minutes from board meetings for the last three years.
Powers of attorney, authorisations etc.
1.15 Specify existing powers of attorney, letters of authorisations etc. granted by the company to any employees or third parties.
2. Statutory accounts and memos from auditors
2.1 The signed and audited annual accounts for the last three years.
2.2 The memorandums from auditors and other material correspondence with the auditors for the last three years.
2.3 Description of the accounting policies and any changes in accounting policies and/or accounting estimates during the last three years.
2.4 Specify the influence from changes in accounting policies and/or accounting estimates during the last three years.
2.5 Specify reconciliation between statutory accounts and internal management accounts, in respect of net result and equity, for the last three years.
Management accounts, budget and estimates
2.6 The internal management accounts/reports (year end) for the last three years.
2.7 The internal management accounts/reports month by month for the last and the current year.
2.8 Provide management comments on the financial performance and development during the last three years and current year (trends in sales, new customers, loss of customers, trend in margins, overhead expenses etc.)
2.9 Copies of budget / estimate including management comments for the last three years and current year.
2.10 Describe the major assumptions (sales development, margins, overhead expenses, financing, investments, taxation etc.) on which the budget/estimate for the current year are based.
2.11 Describe and quantify any major events (changes in customer base, acquisitions, divestments etc.), which have not been reflected in the budget.
2.12 Describe the key performance indicators used by management to control the business, including measurement frequency.
2.13 Describe the internal reporting procedures, systems, deadlines, internal controls etc.
Specifications to statutory / management accounts
2.14 Specify turnover and gross profit by business segment, customer segment or other relevant segment over the last three years and current year and comment on the historical and expected future development.
2.15 Specify overhead expenses over the last three years and current year and comment on historical and expected future development.
2.16 Specify significant one-off or non-recurring items for the last three years and the current year (including amount, reason and implication on profit / loss statement).
2.17 The fixed asset register for the last year and current year including a detailed schedule of intangible assets such as goodwill.
2.18 Describe and quantify any planned material investments in fixed assets.
2.19 Describe the valuation and depreciation policy for intangible and tangible fixed assets.
2.20 The latest available accounts receivable (trade debtors) list including age profile.
2.21 The latest available specification of provision for bad debt together with a detailed description of basis for the provision.
2.22 Copy of the latest available accounts payable (trade creditors) list including ageing profile.
2.23 Specify provisions, including details of customer guarantees, vacation pay, social charges, pension plans (defined benefit plans) etc. as per year-end last year and current year.
2.24 Specify interest bearing assets and liabilities as per year-end last year and month by month for current year.
2.25 Describe and quantify any off-balance or contingent liabilities including financing arrangements, leasing, guarantees, pension commitments, retirement commitments, pending or threatening litigation etc.
2.26 Describe and quantify any implemented or planned restructuring plans (initiative, reason, expected cost savings, initial implementation costs etc).
3. Customer portfolio
3.1 Specify the development in customer portfolio month by month during the last year and current year including turnover and contract contribution.
3.2 Specify the top twenty customer contracts including turnover, contract contribution, first year as customer, period and termination provisions of current contract and.
3.3 Specify material customer contracts, which are up for renewal or re-tender within the next six months.
Customer contacts
3.4 The of top twenty customer contracts.
3.5 The standard customer agreement including general terms and conditions.
3.6 A list of customer contracts, which include penalties for the company’s breach or bad performance of the contract.
3.7 A list of customer contracts with a fixed contractual term over one year.
4. Overview
4.1 The current organisational diagram including name and title of the functional responsible and number of employees by function.
4.2 A list of members of the board of directors (supervisory board), board of management (executive management) and key employees (names, age, educational background, experience and track record within the company.
Employees
4.3 A list the [20] highest paid employees including name, date of birth, date on which employment began, position and department, compensation (including bonus), benefits, notice of termination, severance payment in the event of termination (including any “golden parachutes”) and non-compete obligations.
4.4 The employment / service agreements for the [20] highest paid employees.
4.5 The collective labour agreement(s) which apply to the company’s employees.
4.6 The company’s standard service agreements / terms and conditions of employment (including the standard blue collar and the standard white collar agreement).
4.7 A list of employees (excluding the [20] highest paid) whose employment terms substantially deviate from the collective labour agreement or from the standard terms and conditions of employment, in particular in relation to termination, non-compete and benefit arrangements.
4.8 Any handbook or manuals issued by the company for employees and supervisors, including copy of any policies or guidelines, health and safety rules, disciplinary procedures etc.
4.9 Describe the company’s use of temporary workers and leasing of personnel.
4.10 The termination or severance agreements with key employees during the past twelve months.
4.11 All material consultancy or management agreements.
4.12 Describe any arrangement or agreement between the company and any key employee, which is not entered into in the ordinary course of business or on arm-length basis.
Employee benefit schemes
4.13 Describe any bonus schemes, incentives and performance agreements / arrangements relating to employees and consultants, including but not limited to:
• employee benefit plans,
• stock option and stock purchase plans,
• deferred compensation plans,
• profit sharing plans,
• golden parachutes,
• medical and hospital/surgical insurance plans,
• life insurance plans,
• disability plans,
• incentive and performance-based plans or agreements,
• sales commissions policies or plans.
Labour relations
4.14 Specify all existing worker’s committee(s) / works councils including list of members.
4.15 The reports from meetings of the company’s health, safety and working conditions committee for the last twelve months.
4.16 Describe any strike, collective actions or labour disputes currently pending or settled within the last two years.
4.17 Describe any social plans or collective dismissals implemented over the last two years.
Loans or guarantees to employees
4.18 Specify all loans to and from any present or former employees, consultants and any of their related parties.
4.19 Specify all guarantees made for the benefit of any present or former employees or consultants towards any third party.
Social security / social costs
4.20 Information about the last investigation by the relevant tax authority (social security) authority during the last three years.
4.21 All filings with such authorities during the last three years.
4.22 Specify reductions of social contribution schemes granted to the company (description and financial impact for the last three years) – and provide any document evidencing that the conditions for the reduction of social contribution are met by the company.
Pensions
4.23 Provide full details of all pension schemes including their funding and the latest actuarial valuations (IAS 19).
4.24 The documents currently governing the pension scheme(s) and all explanatory booklets, announcements and similar documents. Provide any other document giving particulars of benefits and entitlements under the pension scheme(s).
4.25 Provide details of any other individual pension plans, schemes or arrangements in respect of any present or former employees, which operate outside or in addition to the pension scheme.
5. Owned real property
5.1 A list of all real property owned by the company including location and usage together with copies from the relevant property register.
5.2 All deeds, documents or agreements evidencing the ownership of any real property.
5.3 Copy of any valuation obtained for real properties within the past three years.
Leased real property
5.4 A list of all real property leased by the company including location, usage, lessor, annual rent, additional charge, period and termination.
5.5 All lease agreements (or other legal title of use) regarding real properties that are not standard.
5.6 Details of any burdensome terms such as repair and restoration obligations, rent adjustment clauses, restriction on subleasing etc.
6. Financing, leasing, guarantees
6.1 All short-term, long-term and other loan agreements, mortgages, indebtedness or other borrowings or financial arrangements entered into by or on behalf of the company, whether secured or unsecured, including credit agreements, promissory notes, swap agreements and any other derivative financial instruments, lines of credit etc.
6.2 Information and documentation related to subordinated debentures, other subordinated loans and shareholders’ contributions.
6.3 Information and documentation related to leasing arrangements regarding machinery, automotives, equipment etc. including item, lessor, annual lease, expiry and termination.
6.4 Information and documentation relating to any material sale-leaseback arrangements.
6.5 Information and documentation relating to factoring / securitisation of accounts receivables.
6.6 All guarantee commitments, performance bonds, letters of support, letters of comfort and similar commitments, mortgages, floating charges and other security agreements or letters of credit issued by the company or any third party on behalf of the company, including parent company guarantees to third parties and any amendments, waivers or consents hereto.
6.7 Documentation related to pledges, liens and other encumbrances in relation to real properties or other assets.
6.8 Information and documentation relating to indemnities / hold harmless and similar undertakings.
6.9 Information and documentation relating to negative pledges, limitations on borrowing or other restrictions on the ability to raise or secure new financing.
6.10 Information and documentation relating to all government grants, subsidies or financial assistance to the company.
6.11 Information on cash pool arrangements, number of banks included in the cash pool, pledges, names of the banks involved and electronic bank platforms.
6.12 Specification of any restricted cash deposits.
6.13 Provide information about other possible material obligations not covered by 6.1 to 6.12.
7. Other agreements and commitments
7.1 A list of top 10 suppliers rated by purchase volume.
7.2 All material agreements with suppliers, manufacturing agreements, cooperation agreements, joint venture or partnership agreements, licence agreements, profit sharing agreements, service agreements, exclusivity agreements for any services or products, marketing agreements, agency agreements, franchise agreements and distribution agreements. A material agreements are this respect considered where the agreements are:
• material for the company’s profit or assets
• outside the ordinary course of business
• not on arms-length basis
• have a duration of more than one year
• expected to result in a loss to the company on completion of performance
• require an aggregate consideration of more than [EUR 200,000]
• involve supply of goods or services to or by the company for an amount in excess of 10% of turnover
• contain any exclusivity or non-compete clauses
7.3 All share purchase agreements or asset purchase agreements entered into by the company (whether as a seller or as a buyer) during the past three years.
7.4 Details of any sale or purchase option or similar agreement or arrangement affecting any assets of the company.
7.5 Information on breach or default by the company or the other contracting party under the terms of any material agreement.
7.6 Information about material verbal agreements between the company and third parties or any related company.
8. Intellectual property rights
8.1 Provide a list with details of all patents, trade or service marks, design, copyright, know-how or other intellectual property rights owned or used by the company (whether such rights are registered or not).
8.2 Provide a list with details of (and documents relating to) all intellectual property in respect of which rights has been granted either to or by the company.
8.3 Provide a list with details of any complaints, objections or claims for alleged infringement in relation to the ownership, use or licensing of intellectual property rights.
8.4 Provide a list of all trade names of the company.
9. Permits and licences
9.1 Provide a list with details of any licenses, rights, consents, permissions or registrations necessary for the company to carry on its business (including pending applications).
9.2 Provide a list of details of all actual or threatened breaches of the permits and licenses list above in 9.1.
9.3 Provide a list with details of pending or threatening injunctions, investigations or reports from public authorities as well as on any infringements of conditions or provisions in any permit or concessions which the company holds or has held.
9.4 Provide details of any inspection carried out by the relevant authorities during the past three years.
10. Disputes and litigations
10.1 Provide a list with details of any existing, pending or threatened litigation or arbitration involving the company (whether as plaintiff or defendant) which either involves an (estimated) amount in excess of [EUR 10,000] per claim or forms part of a series of similar claims (regardless of the amount involved) or any circumstances which may give rise thereto with an indication of the amounts involved, and documentation relating thereto.
10.2 Provide a list with details of any terminated or settled litigation with customers of the company over the last 24 months, which either involved an amount in excess of [EUR 10,0009 or formed part of a series of similar claims (regardless of the amount involved).
10.3 Provide a list with details of any default by the company under any material agreement as defined in section 7.2.
10.4 Provide details of any existing or pending judgements affecting the company.
10.5 Provide a list with details of all claims (including claims for unfair labour practices), disputes, litigation or arbitration relating to unions, employees or ex-employees (or their heirs) and of all severance pay and costs incurred by the company within the last three years and copies of documentation relating thereto.
11. Insurance
11.1 All insurance policies currently in place obtained by the company.
11.2 If the program/structure for liability insurance has been changed compared to the current program/structure during the last three years, then provide copies of summaries / schedules of the previous liability insurance policies for the past three years (including deductibles, retentions, primary & excess limits and policy periods).
11.3 Description of all current or potential outstanding claims under any insurance policies.
11.4 Provide a list with details of all claims filed with the company’ insurers over the last three years.
11.5 Specify the company’s booked reserves/provisions for any self-insured liabilities.
11.6 Specify and describe any significant damages related to uninsured losses during the past three years.
11.7 Provide documentation that all insurance premiums have been duly paid.
11.8 Specify current annual insurance premiums per policy period and line of coverage.
11.9 Specify and describe for any acquisition / divestment during the past three years and the treatment of insurance liabilities / claims at the time of the transaction.
12. Environmental, health and safety
12.1 All licences, permits and consents held by the company which are required under all relevant legislation concerning the operation of the company (operating permits), protection of the environment, health and safety or the generation, transport, storage and use of dangerous substances and /or waste and details of any breaches of such licenses, permits or consents.
12.2 All environmental, health and/or safety notices or communications from any regulatory authorities.
12.3 All environmental, health and/or safety assessments or audits (impact studies, previous environmental audits, waste characterisation and minimisation studies, water and energy reduction studies, asbestos surveys etc.) carried out by or on behalf of the company during the past three years.
12.4 Provide details of the company’s disposal procedures for each type of waste produced by it, copies of waste disposal manifests and copies of all contracts with waste contractors/transporters.
12.5 Provide details of the company’s storage facilities for hazardous substances, e.g. underground storage tanks.
12.6 Provide details of any previous incidents or accidents concerning the company where hazardous substances have leaked into surrounding land/ground water/rivers/air.
12.7 All environmental incident reports and all existing spill prevention and control plans.
12.8 Provide monitoring results of wastewater and air emissions, including sampling and analysis protocols.
12.9 Describe inventory of materials handled and copies of Material Safety Data Sheets (MSDS).
12.10 All health and safety monitoring / reports.
12.11 Communications from neighbouring property owners/pressure groups/residents associations / other third parties or authorities concerning the environmental, health or safety affairs of the company.
12.12 Provide site layout plan(s) including principal storage areas, storage tank locations, drainage networks and on site pumping wells locations.
12.13 Provide any available historic air photographs and plans for the properties used by the company.
12.14 Provide available subsurface information (boring / well logs).
12.15 Specify any environmental capital expenditure plans during the past three years.
13. IT
Human resources
13.1 Provide an organisational diagram for the IT organisation and list all key IT employees.
Financial information
13.2 Provide the latest available IT budget with specification of operational expenses and capital expenses (investments).
13.3 Specify the net book value of all capitalised IT assets.
Applications
13.4 List all software systems used or licensed by the company.
Contracts
13.5 Copies of material IT related contracts / agreements.
Equipment
13.6 List of all IT assets (desktops/laptops, servers etc.)
13.7 List of all network LAN/WAN and provide diagram and an overview of number of sites etc.
14. Tax
14.1 Tax returns filed with the relevant tax authorities for last three years.
14.2 Provide information about the company’s disputes or discussion with relevant authorities in respect of its tax affairs (company tax, VAT, social security taxes and customs) for the last three years and include copies of any relevant correspondence as well as details about penalties, fines or interest charges incurred during that same period.
14.3 Provide information about special tax claims / special tax arrangements with the applicable tax authorities, which are still in force or may have continuing effects.
14.4 Provide all reports or correspondence related to tax audits, investigations or non-routine visits of the company for the last five years. If no such reports or correspondence exist, please provide details of the nature of the investigation and outcome.
14.5 Specify the provision for deferred taxation.
14.6 Provide information about the statement of all aggregated tax losses specify from which year the tax loss arisen.
14.7 All written advice from tax advisers for the last three years.
15. Inter-group / related party relationship
15.1 Describe and provide copies of any intra-group contracts or agreements relating to the provision of any services or arrangements between the company and any other company or entity affiliated within the group including but not limited to:
• Debts
• Cash management
• Shared personnel
• Shared services
• Shared IT
• Shared premises / rent of premises
• Shared assets
15.2 Specify the revenue or the costs affecting the company by such intra-group contracts or agreements.
16. Anti-trust / competition
16.1 Provide details of any potential investigation, notification, filing or correspondence with anti-trust authorities under or in connection with any provision of applicable anti-trust laws.
16.2 Provide details or copies of any agreement or arrangements with one or more competitors (whether or not in writing and whether or not intended to be legally enforceable).
16.3 All agreements or arrangements to which the company or the seller have been a party in respect of which any undertaking has been given by the company or the sellers or order made against them pursuant to any anti-trust or similar legislation in any jurisdiction.
16.4 All agreements or arrangements to which the company is or has been a party in respect of which any statement of objection or negative clearance has been received from any court, tribunal, governmental, national or supra-national authority including the E.U. Commission.
16.5 Provide details of any memberships of branch / trade / industry organisations and minutes of the meetings of such organisations over the last three years.
16.6 Provide details of any agreements or arrangements (or any judgement or ruling) which restricts the company’s ability to compete or its freedom to carry on its business anywhere in the world.
17. Change of control
17.1 All material agreements or arrangements such as:
• Customer contracts
• Supplier agreements
• Financing arrangements
• Leasing agreements
• Tax benefits or subsidies
• Interest in assets, shares etc.
• Pre-emption rights to other shareholders
that contains:
(i) change of control clauses or similar provisions giving the other party the right to terminate the agreements or renegotiate the terms and conditions following a transaction
(ii) non-compete clauses
(iii) non-solicitation clauses
Source: Submitted by a russian law office during a M&A deal as standard procedure...
