Introduction to Due Diligence
This check list is not intended to be comprehensive. The objective is to start you thinking about the due diligence process. A company can spend a lifetime living down a bad first impression. Having your business in order goes a long way to giving a good first impression.
1. Do you have a credible business plan that sets out a sound financial model for the company and distinguishes the company from others? Can you clearly and concisely state the opportunities and risks that your company faces
2. Is your financial record keeping up to date, professional, and presented in a way that accurately describes your company? Does a cash flow statement form part of this?
3. Have you properly protected your intellectual property, and can you prove that you are the owner of it? Do you have records of all licenses that have been granted, and if underlying technology has been licensed to you, has that been properly documented? Are you aware of what trade secrets your technology and business relies on and can you prove that you have adequately protected them?
4. Are your corporate affairs in order? Can you provide on short notice copies of all relevant documentation, such as employee options, lists of shareholders, shareholders' agreements, etc.? Are all of the key partners/shareholders in agreement and providing a meaningful contribution to the company?
5. Are your relationships with your key employees adequately documented, particularly with respect to the ownership of technology, non-disclosure and non-competition?
6. What is your relationship with your bank? What financing do you currently have in place?
7. Is your Board of Directors composed of people who have the necessary skills and experience to contribute to the company's well being? Does your Board of Directors have any "outside" directors on it who are capable and willing to look after the interests of outside shareholders?
8. Do you have lists and copies of your key contracts with your suppliers, distributors, joint venture partners, etc., and can you provide copies on short notice?
9. Can you list your major customers, particularly as to their relationship to total sales? Do you have copies of all marketing materials distributed to the public?
GARY DUNN, LAWYER & MEDIATOR
2768 WEST BROADWAY AVENUE, #568
VANCOUVER, BC V6K 4P4, CANADA