Generic Duediligence Checklist

JKH GENERIC DUE DILIGENCE CHECKLIST
GENERIC DUE DILIGENCE CHECKLIST 1) COMPANY INFORMATION
(a)
(b)
A complete corporate structure/ organisation chart of the group/company. A statement indicating details of any arrangement(s) e.g. shareholders agreements, partnership agreements, etc. amongst the shareholders including copies of written agreements, if any. Date of incorporation of the Company. Audited financial statements of the Company for the last three years and unaudited statements for the last year. Copy of the up to date Memorandum of Association and Articles of Association of the Company. A copy of the Certificate of Incorporation of the Company (including any certificate issued consequent upon a change of name), as well as a copy of the Certificate of Commencement of Business, in case of the Company being a public company. A statement indicating whether the Company is registered as a public company or private company and, in the case of a private company, whether it is deemed a public company and the reasons thereto and the date of such deeming. A list stating the registered office, the principal office, branch office(s) other office(s), factories, warehouses, etc. of the Company. Please provide contact telephone, fax, telex numbers and the name and address of the person incharge. Provide the address where the statutory registers, records and books of the Company are kept. Name and address of the Company Secretary, if any. If no Company Secretary, then the person performing the functions of the Company Secretary. Names and addresses of persons, if any, who have been charged/designated by the Board with the responsibility of complying with the statutory provisions of the Companies Act. Name and address of the Auditors of the Company. A brief description of the activities undertaken by the Company.
(c)
(d)
(e) (f)
(g)
(h)
(i) (j) (k)
(l) (m)
2) DIRECTORS
a) List of Directors of the Company along with the following details:

i) ii) iii) iv) Full name, address and contact telephone number Nationality Age Other Directorships and business interests
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v) Beneficial and non-beneficial interests including the registered holder in any capital, debentures or warrants of the Company or any subsidiary or associated Company. vi) Specify if any of the Directors are executive or non-executive. vii) Any management job title held by any of the Directors. viii) Date of appointment and the date of retirement, if any.
b) List of Directors having any service agreement(s) with the Company and/or with any of
the Companies. Please provide copies of the service agreements. In the absence of any service agreements please provide complete details to the terms and conditions applicable to their employment.
c) Details of the annual remuneration along with aggregate emoluments payable to the
Directors listed in (a) above
d) Statement indicating in detail the list of companies, firms in which the Directors are
interested in nature of interest of such Director.
e) Full particulars about the nature and extent of any interests of Directors in transactions
which are or were unusual in their nature or conditions or significant to the business of the Company.
f) Complete list of copies of any personal guarantees, indemnifications furnished by the

Directors on behalf of the Company and vice-versa
g) List of loans along with copies of loan agreements, if any, granted to the Directors by
the Company.
h) Details of any settlement or trust/foundation or proposed settlement or trust/foundation

made by any of the Directors or under which any such Director is or may become interested in respect of any shares of the Company (along with copies of relevant documents like the Trust Deed, Settlement Deed etc).
i) Details of any personal bankruptcy of any Director and of any insolvency of a group of
which any of the Directors was a director, officer or shareholders
j) Statement indicating the maximum and minimum number of Directors that could be
appointed in respect of the Company and copy of the resolution, if any, fixing such number.
k) Indicate as to whether any directors/officers acts under Power of Attorney(s) and if

yes, a list of such directors/officers and copies of the Power of Attorney(s). l) A statement indicating quorum requirements for the meeting of the Board of Directors of the Company retiring Directors for the Company.
m) List of Directors who are liable to retire by rotation for the Company. A list of nonn) List of alternate directors, if any, with their dates of appointment
3) STATUTORY COMPLIANCES
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a) A complete list of all statutory registers maintained by the Company under various laws and enactments.
b) Copies of compliance certificates, if any, issued by the Managing Director or the

Company Secretary. c) Copies of Annual Return filed with Registrar of Companies (ROC) for the last three years. d) Copies of all other statutory forms filed with the ROC.
e) Copies of Certificates of Registration covering the forms filed, issued by the ROC.
4) PERSONNEL
a) A list of personnel entrusted with powers of management in the Company. Details of

senior management team.
b) Corporate and organizational chart including officers in charge of the Company and its
divisions.
c) Copies of the standard appointment letters issued in respect of each category of

employees.
d) Statement showing numbers and types of staff at each location. e)

Schedules of present employees analyzed in terms of Permanent, Contract, Casual, Part time. Schedule also to indicate : full name, position and age; date joined, length of continuous employment and notice period; salary and hours of work; holiday and sick pay entitlement; retirement plans, if any; accrued leave, long service and accrued holiday payments; and statutory tax contributions. Union vs. non unionized staff Staff welfare policies
f) Details of all contracts, agreements or arrangements with independent contractors

including copies of any relevant documents.
g) Statement whether the Company recognizes any trade union or other similar body
representing its employees. Copies of any agreements, or description of any unwritten agreement or arrangement with any such body, including collective bargaining arrangements.
h) A statement describing the nature, scope, extent of labour or other similar body
representing its employees. Copies of any agreements of describe any unwritten agreement or arrangement with any such body, including collective bargaining arrangements.
i) A statement indicating litigation/dispute, if any, relating to Employee State insurance

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Scheme, Provident Fund Dues, or other labour related dues.
j) Copies of documentation or arrangements of any share option, share incentive, profits

sharing arrangements, or other incentive schemes for employees and contractors including bonus arrangements. k) List of all pension, retirement benefit schemes along with copies of relevant documents including but not limited to gratuity, super-annuation and Provident Fund.
l) Details of all unfunded obligations on gratuity pension, super-annuation and the like. m) Details of any disputes with former directors, employees or independent contractors
which remain unresolved.
n) Details of any persons or retirement benefits paid or promised by the Company

whether legally binding or not.
o) Details of any standard disciplinary and grievance procedure followed by the

Company.
p) Copy of all relevant documentation relating to the disciplinary proceedings, code of

conduct for employees, standing orders, etc. for the Company. q) Copy of staff handbook(s) and copies of any other rules or procedures relating to employees. r) Details of any retrenchment or redundancy plans relating to employees s) Details of last pay increase and any future anticipated pay increase relating to employees. 5) SHARE CAPITAL a) A statement indicating the authorised, issued, subscribed and paid-up share capital, classes of shares of the Company. b) In the case the Company is listed on a stock exchange, the name of the stock exchange and the class and number of shares so listed. Please provide a copy of the listing agreements, statements in lieu of prospectus or copies of the prospectus. c) A statement indicating dates of any increase in the authorised, issued, subscribed and paid-up capital of the Company along with the copies of the relevant resolutions. d) Copies of documents or verbal agreements/understanding of: i) Any agreement or commitment to create, issue or transfer shares/conversion of loan into equity. ii) Any rights of pre-emption. iii) Any share conversion rights such as through convertible debentures or the like. iv) In case of issuance of shares to the public, the dates of each public issue and other relevant details such as the number of shares offered, the numbers subscribed etc. and copies of any advertisements, prospectuses, placement memoranda or other similar document issued in connection with any such offer.
6) SHAREHOLDING
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a) Names and addresses of all shareholders showing number of shares held and stating whether held beneficially otherwise.
b) In the case of individuals, details of any limitations on their ability to transfer their
shares. Details of any encumbrances, charges, liens, pledges created, if any, on the shares. c) Particulars of joint holding (if any) and the following information : i) A copy of the relevant instrument/deed (if any). ii) A statement indicating the names, addresses and contact number of each Trustee. iii) The date on which the relevant interest was transferred to the Trustees or, in the case of subsequent Trustees, the original Trustees. iv) The full name and address of the settler. v) Details relating to whether the shares held by the trust, are the subject matter of any dispute, litigation, proceedings under insolvency and other laws. vi) A confirmation to the effect that the transfer of beneficial interest in the trust was not intended either wholly or in part to defeat the settler's creditors.
d) Statement on the quorum required for a meeting of the shareholders of the Company.
3) INTELLECTUAL PROPERTY
a)
Details of any patents, designs, trade marks, service marks, copyright (including software) and details of validity, registration, renewals and any restrictions on assignment, or applications for the same;
b) c) d)
Details of any licenses granted to or by the Company;
Copies of any non-disclosure or other agreements relating to the use of patents, registered designs, trade marks or copy right; Copies of any internal policies and procedures regarding access and use of confidential information; and
e) Details of trade names (if any). f) Details of usage of anyone else's trade marks, trade names etc, by the Company.
4) AGREEMENTS/CONTRACTS a) List of all contracts/agreements entered into by the Company including joint ventures, profit sharing agreements, partnerships and options to acquire shares. b) Copies of all joint venture agreements, technical collaboration agreements, profit sharing agreements, agreements relating to the options to acquire shares/interest in other companies or businesses. c) Copies of all supply and distribution agreements, standard purchase order form (general conditions).
d) Copies of any commission, brokerage, agency or similar contracts relating to the sale
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or procurement of goods or services, standard form sale order (general conditions).
e) A list of all leases, not only of real estate, but also of major equipment, mentioning the
leasehold owner, the term of the lease, the lease price and options, if any, available. Details of any third party transfers agreed to. f) Copies of any contracts relating to maintenance of servicing of any facilities or other assets (such as machinery, equipment etc.) Provide list of tenure. regarding any long term commitments - financially, operationally or commercially including, but not limited to any present prospective or envisaged partnership or joint venture arrangement or any other present envisaged or planned (whether or not enforceable and whether in writing or oral) arrangements on a long term basis. h) Copies of License Agreements, if applicable. i) Copies of Contract Manufacturing Agreements, if applicable.
g) Copies of any agreements (or in the absence thereof, all details of any arrangements),
5) BORROWINGS
a) A list of all borrowings including but not limited to secured loans, unsecured loans,
debentures, fixed deposits, public deposits, deferred credits, undertaken by the Company from banks, financial institutions or otherwise from private investors, shareholders etc. Details such as i) Date of the borrowing ii) Amount borrowed iii) Interest payable iv) Date(s) of repayment v) Details of any special conditions attached
vi)
Number of installments, if payable in installments, and also the number of installments paid and amount of each installment. Details of the remaining installments and the period and date of such repayment.
vii) Copies of all resolutions of the Board and/or General Meetings of the Company relating to the borrowings.
viii)
Nature and type of security provided for each borrowing.
ix) Guarantees given including corporate guarantees and personal guarantees by directors and shareholders with full particulars and copies of relevant documents. x) Copies of documentation of all borrowings and other financial facilities of the Company including bank overdrafts within the companies. xi) Copies of sanction letters issued by the lenders giving complete details of the terms and conditions of the loans. xii) Copies of all security documents relating to such borrowings, and any agreements or commitments to grant any such security. xiii) Copies of any default notices served on the Company and details of any noncompliance with the borrowing and security documentation referred to above.
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xiv) Please provide copies of relevant documentation or a brief description of financial grants or other assistance from a governmental or other body and state and amount owing to any such body. xv) Copies of documentation of all lending by the Company to other parties or members/shareholders of the Company. xvi) Copies of all security documents, including letters of comfort held by the Company and relating to such lending. xvii) If any of above matters has not been reduced to writing, please provide a brief description thereof. xviii) List and copies of authorization/sanctions from the Board/Shareholders of the Company and Government permissions where necessary in respect of Lending. 6) INVESTIGATIONS, LITIGATION AND DISPUTES a) Details of any current investigations in respect of the Company by any regulatory body. b) A list of any past and current litigation, arbitration or other disputes or proceedings affecting the Company and any person for whose acts or defaults the Company may be vicariously liable which, to the Company's knowledge, is currently involving the Company, or is contemplated, including but not limited to: i) Company, Directors, Shareholders ii) Borrowings, Lending iii) Employees iv) Property v) Patents, trademarks, copyrights vi) Customers, suppliers vii) Insurance viii) Taxation including income tax, excise, sales tax etc. ix) Environmental matters x) Monopolistic, Restrictive and Unfair Trade practices xi) Electricity supply c) In respect of any past or current litigation or other dispute, copies of: i) Any pleadings or other documents filed at court in connection with such dispute; ii) Any relevant correspondence; iii) Opinions from counsel or other advisers; and iv) Estimate of legal costs d) Any injunction, order or judgement still in force made by any court or regulatory body against the Company. e) Any undertaking given by the Company to any court or any third party arising out of any legal proceedings. f) List and description of all pending or threatened government or other investigations involving the Company, any subsidiary or any officer or director
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g) Consent decrees, judgments, etc., under which there are continuing or contingent obligations h) Letters from lawyers to auditors concerning litigation and other legal proceedings
i) Unsatisfied judgments against or brought by the Company; j) Existing and/or threatened employees claims
k) List of all lawyers/law firms engaged by the company or consulted from time to time. 7) LAND AND BUILDING a) A list of all the properties owned, leased or to which the Company has a license or other right or interest giving a full description of each property including whether the Company has a freehold or leasehold interest, year of acquisition, the nature of the user of the property, the type of construction and whether any constructions are in need of repair. b) Detail of all annual outgoing on all properties such as rentals, taxes etc. c) Copies of documents recording the title to property and a plan of each of the properties. d) A list of occupiers of the properties where any of them are occupied other than by the Company. e) Copies of all leases, sub-leases or tenancy agreements or amendments to such documents, copies of all agreements to enter into such arrangements. f) Details and copies of all licenses, covenants and restrictions relating to the properties. g) Copies of all assignments relating to the properties and agreements to assign. h) Copies of all agreements to make alterations. i) j) Copies of all mortgages and charges affecting the properties. Copies (or details where unwritten) of any contract for supply of services such as gas, water and electricity to the properties of the Company. Copies of any permissions for the plants used.
k) Copies of any outstanding notices regarding the properties. l) m) Copies of any recent professional valuations/re-valuations in respect of the properties of the Company. n) List of properties owned by others but used by the Company. Also list of properties owned by the Company used by others, along with complete details of such properties with copies of relevant documents. o) Copies of all planning permissions, buildings regulations, approvals and any other forms of consents, licenses, orders or otherwise, affecting any of the land. p) Details of any discussions with any regulatory authority regarding anticipated future use of any of the land, and any potential restrictions on such use.
q)
Details of any disputes, claims or adverse proposals in respect of any of the land and its use.
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r) 8) IT
Details of any easements or any third party rights over any of the land.
a)
Details of all hardware and software systems owned or used by the Company. Confirmation that all software is Year 2000 compliant; and
b) Details of all other communication systems owned or used by the Company

c) Information Systems (IS) d) Summary of key IS personnel, including background and job descriptions. e) Summary of backup and disaster recovery procedures.
9) LICENSES/REGISTRATION a) Details of all permits, licenses or approvals used and which needs to be confirmed including, but not limited to, those relating to the construction, installation, ownership and operation of any assets and the provision of any services under any of the contracts.
b)
Government licenses, permits, approvals etc.
c) Details of whether such permits, licenses or approvals can be assigned or novated. If not, details of necessary applications for such permits, licenses or approvals. d) Details of any breach of any such permits, licenses or approvals (if an e) List of all valuable rights held by the Company.
10) INSURANCE a) Schedule or copies of all material insurance policies of the Company covering property, liabilities and operations, including product liabilities. b) Schedule of current insurance, amounts of cover and claims outstanding/threatened in respect of the assets to be transferred. c) Details of insurance claims made over previous 5 years in respect of the assets. d) List and description of all material property, casualty, liability and other insurance policies e) Any directors' and officers' liability insurance policies f) Description of present reserves for, and all potential claims with respect to, any selfinsurance
g) History of all insured claims including paid, reserved, and related expense amounts. h) Loss runs for workers' compensation and general liability i) Any notice or other information possessed regarding cancellation of, or material premium increases under such policies.
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11) FINANCIAL INFORMATION a) Audited financial statements with schedules for last 5 years and interim statements for periods subsequent to the most recent fiscal year end. b) Management letters or special reports by auditors and any responses thereto for the last three fiscal years. c) Monthly income statements for most recent 12 months
d) e) f)
g) h) i) j)
Internal financial (profit and loss, capital expenditures, etc.) projections, and all supporting information for 2-5 years. Most recent business plan. List of any off-balance sheet liabilities not appearing in most recent financial statements (including the notes thereto). Explanation of foreign exchange accounting policies, if any Description of revenue/cost recognition policies Summary of accounting policies to the extent not disclosed in financial statements Property Plant & Equipment
i) Analysis of tangible fixed assets by category, cost and accumulated depreciation ii) Basis on which tangible fixed assets are included in the balance sheet, including recognition criteria, valuation and depreciation policy iii) Terms of leased property including options for renewal, lease classification, potential of renewal terms and restrictions on use iv) v) k) i) ii) Adequacy of insurance Details of capital work-in-progress Inventories Copies of any valuations of the Company's inventories List of inventories by type and location Details of inventory valuation policies and copies of any valuations made. Adequacy of provisions for obsolete, damaged and unusable inventory Details of inventory control procedures Physical verification of a sample of stock Accounts Receivable Ageing schedules for accounts receivable for the last two years.
iii)
iv)
v)
vi) l)
i)
ii) Details of credit arrangements in favour of customers given unusually long terms for payments.
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iii)
Analysis of bad debt write-offs by account for the last five years.
iv) List of trade receivable by customer and obtain explanations for significant balances v) vi) vii) m) i) Normal and special credit terms granted to customers Assessment of adequacy of allowance for doubtful debts Invoicing/collection procedures Cash Balances Banking arrangements including any special restrictions on the use of facilities Analysis of cash balances by major categories Accounts Payable Payment terms for key suppliers Ageing of accounts payable and address any trends over time Any short-term financial risks (interest rate, forex) Other Assets and Liabilities Details of accruals and prepayments Analysis and support for significant items Appropriateness and adequacy of accruals Nature of prepaid expenses Past Performance
ii)
n) i) ii) iii) o) i) ii)
iii)
iv) p)
i)
Summarise key financial information for the past three years, from the audited accounts, to identify any unusual trend.
ii) iii) iv)
Review latest available management accounts.
Revenues, gross margin and operating profit by customer for the past year and current year to date. Revenues, gross margin and operating profit by product line for the past year and current year to date. v) to date q) i) Schedule of non-recurring expenses and income for prior year and current year Related Party Transactions Identification of related parties
ii) Details of dependence on intra-group customers and/or suppliers and the impact of special arrangements (discounted prices, payments and other terms) iii) Details of transfer pricing policies
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iv) v)
Details of special trading agreements Details of intra-group balances and how they will be treated after the transaction
vi) Description of all related party transactions, which have occurred during the last three years (and any currently proposed transaction) and all agreements relating thereto
r)
s) t)
Breakdown of General & Administration expenses. Breakdown of selling, distribution, marketing and administrative expenses Cost of sales breakdown
u) Information regarding any indebtedness to the Company or any of its subsidiaries of directors and senior officers. v) Description and listing of current reserves. w) Schedule of other assets. 12) TAXATION a) Determine what taxes (income, excise, VAT, employment, property, stamp duties, or other duties and taxes) apply to the company. b) Determine whether the companys tax returns have been filed on a timely basis as required by law. c) Obtain a copy of all assessments received and all correspondence with the tax authorities for any open tax years (or for a minimum of the last three years). i) What is the status of the companys tax audits and administrative or court proceedings ii) What is the anticipated completion date of the proceedings iii) What are the legal issues and the merits of such issues d) Determine if the acquiring company or the target company qualifies for any special tax treatment, e.g., tax holiday, period of reduced tax rate, capital gains taxes. e) Obtain schedules of property, plant and equipment and determine the allowable methods and rates of tax depreciation for the companys assets. f) Details of any arrears due to, or current disputes with, any government body and of any disagreed assessments. g) Details of any tax clearances obtained and copies of any tax indemnities taken or given and of any rulings or agreements obtained from any tax authority. h) Details of any losses to be carried forward and any allowances claimed. i) Details of any scheme or arrangement entered into designed wholly or partly for the purpose of avoiding taxation. j) Details of any transaction, or services of transactions, which could, in whole or in part, be regarded, construed or challenged by any tax authority as involving the motive or effect of avoiding, reducing or delaying a possible liability to taxation.
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k)
Specify all jurisdictions in which the Company pays tax.
l) Details of any outstanding taxation claims outside the relevant jurisdiction. Details of any disputes or matters in connection with the taxing authorities of those jurisdictions. 13) LIABILITIES AND INSOLVENCY a) Details of any moneys borrowed and raised by the Company, including details of any undrawn or unborrowed amounts thereunder, together with a copy of the relevant loan or debt instrument. b) Details of any charges, debentures, mortgages or other security given by the Company together with a copy of any relevant document. c) Confirmation that no breach exists in respect of the obligations of any banking facilities used by the Company. d) Details of any contingent liabilities or liabilities outside the ordinary course of business. e) Details of any insolvency event or circumstances which may lead to any insolvency event. f) Schedule of any future capital commitments in relation to any assets or contracts or any other matter.
g) Schedule of all advances, cash deposits, goods or services provided and not paid for, or any other indebtedness to be transferred. h) Details of any guarantees or indemnities given by the Company together with a copy of the relevant guarantee or indemnity. 14) ENVIRONMENT AND HEALTH AND SAFETY a) Copies of any environmental audit/investigation reports on the assets to be transferred and their implementation. b) Copies of any health and safety reports, audits or surveys undertaken and their implementation. c) Details of any existing, pending or threatened prosecution or investigation under relevant environmental or health and safety legislation or details of any circumstances which may lead to such prosecution or investigation. d) Details of any notification received by the Company under any environmental laws requiring it to take or omit to take action.
15) COMPETITIVE ENVIRONMENT a) Industry/market overview and positioning of company b) Key competitive advantages
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c) Market risks and opportunities d) Strategic fit to JKH
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JKH GENERIC DUE DILIGENCE CHECKLIST