Comprehensive Due Diligence Checklist for Companies
Nubyul Law
When evaluating potential investments or partnerships, conducting thorough due diligence is crucial for ensuring good governance, transparency and minimizing risks. This comprehensive checklist serves as a guideline for assessing the key aspects of a company’s operations, legal compliance, and financial stability. Below, we outline the primary areas of focus with corresponding required documentation.
Company Portfolio:
- Name:
- Year of Establishment:
- Location:
- Valuation:
- Background History:
1. Constitutional Documents and Secretarial Compliance Review
A thorough analysis of the Articles of Association and Memorandum of Association is essential for identifying any inconsistencies or instances of non-compliance. This review also includes verifying statutory filings and identifying any pending or past legal actions related to non-compliance.
Required Documents:
- Articles of Incorporation
- Memorandum of Association
- Certificate of Incorporation
- Board meeting minutes and resolutions
- Share registers and stock ledgers
- Statutory filings with regulatory authorities
- Director and shareholder registers
- Secretarial compliance certificates
2. Corporate Books and Records Review
It’s imperative to examine the accuracy of share registers, stock ledgers, and transfer records, alongside validating board meeting minutes and scrutinizing management contracts for discrepancies.
Required Documents:
- Share certificates
- Register of members
- Register of directors and officers
- Register of charges
- Annual financial statements
- Board meeting minutes and resolutions
- Shareholder meeting minutes
- Corporate governance policies and procedures
3. Loan and Debt Documentation Review
Assess loan agreements, debentures, and financing arrangements to identify any clauses that may pose special risks or indicate potential defaults. This includes confirming any encumbrances linked to the company’s liabilities.
Required Documents:
- Loan agreements
- Debenture certificates
- Security documents (e.g., mortgages, pledges)
- Loan repayment schedules
- Intercreditor agreements
- Correspondence with lenders
- Loan facility agreements
- Debt covenants and compliance reports
4. Labor and Employee Compliance Review
Evaluate the company’s adherence to labor laws by reviewing employment contracts, health and safety policies, and employee benefits. It’s crucial to identify any potential undisclosed liabilities, such as pending labor disputes.
Required Documents:
- Employment contracts
- Employee handbooks and policies
- Payroll records
- Employee benefit plans
- Union agreements (if applicable)
- Workers’ compensation records
- Records of employment disputes or litigation
- Internal Service Regulations
5. Key Contract Review
Review contracts with key stakeholders, including EPC contractors and suppliers, to identify any unfavorable terms or unresolved disputes and to assess the implications of contract termination clauses.
Required Documents:
- Contracts with EPC contractors
- Supplier/vendor agreements
- Consultant agreements
- Key management personnel contracts
- Distribution agreements
- Service level agreements
- Non-disclosure agreements
- Intellectual property licenses
6. Immovable Property Ownership or Lease Review
Examine property titles, leases, and related agreements for compliance with land acquisition regulations. This section focuses on identifying any encumbrances, disputes, or legal restrictions on property ownership.
Required Documents:
- Property titles
- Lease agreements
- Deeds of sale or transfer
- Land use permits
- Zoning certificates
- Property tax records
- Environmental assessments (if applicable)
- Boundary and survey reports
7. Permits and Approvals Verification
Confirm the status of regulatory permits and licenses required for business operations, along with any pending approvals. This assessment also includes determining the risks associated with compliance delays.
Required Documents:
- Regulatory permits and licenses
- Environmental permits
- Building permits
- Operating licenses
- Health and safety permits
- Land use approvals
- Governmental authorizations
- Inspection reports
8. License and Regulatory Compliance Review
Evaluate relevant licenses, certifications, and regulatory filings. Identification of non-compliance risks can help mitigate potential penalties and legal repercussions.
Required Documents:
- Industry-specific licenses and certifications
- Regulatory filings
- Compliance reports
- Government correspondence
- Regulatory audit reports
- Regulatory inspection records
- Adverse regulatory actions or sanctions
9. Litigation Assessment
Review pending and threatened litigation to evaluate potential liabilities, legal expenses, and reputational risks associated with legal challenges. Understanding the effectiveness of litigation management strategies is also vital.
Required Documents:
- Legal complaints and pleadings
- Court orders and judgments
- Settlement agreements
- Correspondence with legal counsel
- Litigation reserves and accruals
- Legal opinions
- Insurance policies related to litigation
- Regulatory investigations and enforcement actions
10. Risk Assessment
Conduct a comprehensive review of pending litigation, evaluation of strategic plans, and implications of regulatory changes. This section also assesses the impact of potential oversights and decisions on overall company risk.
By systematically addressing each of these key areas, stakeholders can gain a clearer understanding of the company’s operational health and regulatory compliance, ultimately leading to more informed decision-making. For a more tailored approach to your due diligence process, consider consulting with legal professionals who specialize in corporate governance and compliance.