Due Diligence Reporting – commercial records & contracts, claims & compliance – are you ready?

posted in Compliance Management, Contract Management, Entity Management, General Counsel, Reporting

Whether you’re a start-up or working for a well-established enterprise, one day you could find yourself lumped with the onerous task of due diligence reporting for a potential buyer or investor – and you’ll want to be prepared.

If the preparation of due diligence falls on the CEO, CFO or sole Legal Counsel, it always pays to have a checklist of the key requirements upfront to ensure you don’t leave any stone unturned, and that the process runs as smoothly as possible.

Here is a run down of some of the initial records and documentation to help get you on your way to due diligence perfection.

 

Corporate Records & Commercial Contracts

Some of the first areas of due diligence preparation that would require your attention are corporate records and commercial contracts. Some key elements you may need to provide could include:

  • The company’s Certificate of Incorporation/Articles of incorporation
  • List of ownership and shareholders register
  • Minutes of board meetings and materials submitted to the board of directors
  • Current and historical shareholder and optionee lists, including dates and prices
  • Any agreements relating to the purchase or issuance of securities, and voting weights
  • A list of proxies and power of attorneys
  • Record of company’s compliance forms, including copies signed by past or present employees and consultants.

Scratching your head wondering how easily accessible all this information would be? A sound legal software like effacts would assist you generate these lists and access these records with a few clicks.

 

Claims & Compliance records and documentation

Now ask yourself how long it would take to provide the following detailed summaries – concerning the company, any significant subsidiaries, the executive officers or its directors – along with all related current and historical documents and correspondence:

  • Current and past contracts, including key terms, obligations and dates
  • Historical claims, risk exposure and claim outcome, including settlement agreements
  • Any pending litigation, threatened litigation, or disputes
  • Record of the company’s compliance forms with all signatures from past and present employees
  • All correspondence between the company and regulatory bodies.

These represent a small portion of the due diligence reporting process, in another post we cover how to prove your net worth including real estate, assets and IP.

 

Common issues with Due Diligence reporting

The worst-case scenario is when personnel responsible for legal matters and governance change over the years. When this occurs, naturally some knowledge goes with them and much of the correspondence gets buried deep in their old emails. Whether you can access their history or not, this could present some due diligence issues and road blocks for the deal.

If you’ve had just one legal counsel, the process could be a little simpler but will most likely involve trudging through old emails and files and the information found may be incomplete.

Or you might be lucky with a super thorough and organized legal counsel. In this instance, finding most of the necessary files may not be a problem, however generating reports in an appropriate format could still require some time and budget.

 

The ultimate Due Diligence solution

The best-case scenario is a truly consistent document management system that you can trust, with complete and accurate information at your fingertips. Meta data like contract values, business registration, addresses, dates of acquisition, expiration dates and more are tracked and can easily be found without having to comb through documents. And, when all your data is cross-referenced your team can compile, present and share the information your potential investor needs quickly and securely, making your company more attractive.

For a handy and simple checklist for Due Diligence reporting to get you started, download our free Beginner’s Guide to Due Diligence.

Due diligence checklist