Due Diligence Checklist Angel Investors

Post on: 18 Май, 2015 No Comment

Every investor approaches due diligence differently. Some angel investors may request information in a detailed manner all at once, while others may simply request information at different times or stages. Regardless of an investors method to obtain information on a potential company, it is a proven fact that exercising thorough due diligence is indicative of more profitable returns. The following documents may be requested in due diligence.

General Corporate Materials

These documents include:

The companys

articles of Incorporation (and all amendments)
bylaws (and all amendments), minute book (including all minutes and resolutions of shareholders and directors, executive committees, and other governing groups)
organizational chart
list of shareholders (and number of shares held by each)

Copies of

agreements (relating to options, voting trusts, warrants, puts, calls, subscriptions, and convertible securities)

active status reports (in the state of incorporation for the last three years)

A list of

all states where the company is authorized to do business (and annual reports for the last three years)

all states, provinces, or countries where the company owns or leases property, maintains employees, or conducts business

all of the company’s assumed names and copies of registrations

A Certificate of Good Standing from the Secretary of State of the state where the company is incorporated

Financial Information

The most recent financial statements

that have been audited for three years (including the auditor’s reports)

that have not been audited (including comparable statements of the previous year)

The auditor’s letters and replies for the past five years

A schedule of

all indebtedness and contingent liabilities

inventory

accounts receivable

accounts payable

A description of depreciation and amortization methods and changes in accounting methods over the past five years

Any analysis of

projections, capital budgets, and strategic plans

fixed and variable expenses

gross margins

If available

the company’s credit report

analyst reports

The company’s general ledger

A description of the company’s internal control procedures

Physical Assets

A schedule of

fixed assets and their locations

sales and purchases of major capital equipment during the last three years

All U.C.C. (Uniform Commercial Code) filings

All leases of equipment

A schedule of the company’s business locations

Copies of all real estate leases, deeds, mortgages, title policies, surveys, zoning approvals, variances, or use permits

Intellectual Property

A schedule of

domestic and foreign patents and patent applications
trademark and trade names
copyrights
(copies of) and copies of all consulting agreements, agreements regarding inventions, licenses, or assignments of intellectual property to or from the company
(summary of) any claims or threatened claims by or against the company regarding intellectual property

A description of

important technical know-how

methods used to protect trade secrets and know-how

Any

work for hire agreements

patent clearance documents

Employees and Employee Benefits

A list of

employees, including positions, current salaries, salaries, and bonuses paid during last three years, and years of service
(and description of) benefits of all employee health and welfare insurance policies or self-funded arrangements

A description of

all employee problems within the last three years, including alleged wrongful termination, harassment, and discrimination

any labor disputes, requests for arbitration, or grievance procedures currently pending or settled within the last three years

worker’s compensation claim history

unemployment insurance claims history

Copies of

collective bargaining agreements, if any

all stock option and stock purchase plans and a schedule of grants

All employment, consulting, nondisclosure, nonsolicitation, or noncompetition agreements between the company and any of its employees

Resumes of key employees

The company’s personnel handbook and a schedule of all employee benefits including holiday, vacation, and sick leave policies

Summary plan descriptions of qualified and nonqualified retirement plans

Licenses and Permits

Copies of any governmental licenses, permits, or consents
Any correspondence or documents relating to any proceedings of any regulatory agency

Environmental Issues

Environmental audits, if any, for each property leased by the company
A list

of hazardous substances used in the company’s operations
of environmental permits and licenses
identifying and describing any environmental litigation or investigations
identifying and describing any known superfund exposure
identifying and describing any contingent environmental liabilities or continuing indemnification obligations

A description of the company’s disposal methods

Copies of all correspondence, notices, and files related to EPA, state, or local regulatory agencies

Federal, state, local, and foreign income tax returns for the last three years
States sales tax returns for the last three years
Employment tax filings for three years
Excise tax filings for three years
Any

audit and revenue agency reports
tax settlement documents for the last three years
tax liens

Material Contracts

A schedule of all subsidiary, partnership, or joint venture relationships and obligations, with copies of all related agreements

Agreements

loan and bank financing contracts, line of credit, or promissory notes to which the company is a party

security, mortgages, indentures, collateral pledges, and similar contracts (including guaranties to which the company is a party)and any installment sale contracts

distribution, sales representative, marketing, and supply contracts

any options and stock purchase contracts involving interests in other companies

nondisclosure or noncompetition agreements to which the company is a party

Copies of all contracts between the company and any officers, directors, five-percent shareholders, or affiliates

Any letters of intent, contracts, and closing transcripts from any mergers, acquisitions, or divestitures within the last five years

The company’s standard quote, purchase order, invoice, and warranty forms

All other material contracts

Product or Service Lines

A list of all existing products or services and products or services that are under development
Copies of all correspondence and reports related to any regulatory approvals or disapprovals of any of the company’s products or services
A summary of

all complaints or warranty claims
results of all tests, evaluations, studies, surveys, and other data regarding existing products or services and products or services under development

Customer Information

A schedule of

the company’s twelve largest customers in terms of sales thereto and a description of sales thereto over a period of two years
unfilled orders

Any supply or service agreements

A description or copy of

the company’s purchasing policies

the company’s credit policy

the company’s major competitors

A list and explanation for any major customers lost over the last two years

All surveys and market research reports relevant to the company or its products or services

The company’s current advertising programs, marketing plans, budgets, and printed marketing materials

Litigation Issues

A schedule of all pending litigation
A description of any threatened litigation
Copies of insurance policies possibly providing coverage as to pending or threatened litigation
Documents relating to any injunctions, consent decrees, or settlements to which the company is a party
A list of unsatisfied judgments

N. Insurance Coverage

A schedule of

(and copies of) the company’s general liability, personal and real property, product liability, errors and omissions, key-man, directors and officers, worker’s compensation, and other insurance
the company’s insurance claims history for past three years

Professionals