Exercise 1: Draft a requisition list and list items to be reviewed

77 Foods Private Limited engaged in “manufacturing, wholesale & retail selling of

healthy snacks”

A. Please complete a requisition list for the following with regards to the due
diligence:

1. List 5-7 licenses/approvals/sanctions to be requested from 77 foods relating to the

nature of the business.
Ans.

1. Approval of the ‘snacks’ that you are manufacturing from the Food and Drug
Authority, Maharashtra.

2. Requisite Approvals of the FSSAI (Food Safety and Standards Authority of India).
Also, what kind of approval is that, whether it is a basic registration or a state
licence?

3. Whether the company is engaged in the business of ‘export of snacks’ and if yes,
then whether the IE Code have been obtained from Directorate General of Foreign
Trade (DGFT), Ministry of Commerce and Industries, Government of India?

4. Whether the Food Safety Training & Certification (FoSTaC)1 has been obtained
from the FSSAI after requisite training of personnel as per the following:

1. In terms of Section 16(3)(h) of the Food Safety and Standards Act, 2006, FSSAI
has to ensure training (whether within or outside their area) of persons who
are or intend to become involved in Food Businesses, whether as FBOs or
employees or otherwise.

2. All FBOs having Central License or State License should have at least one trained
and certified Food Safety Supervisor for every 25 food handlers or part
thereof on all their premises. These supervisors should in turn carry out
periodic onsite training of all food handlers at least on quarterly basis and
maintain record thereof for food safety audit and inspections. Food handlers in
all petty food business that are registered should be trained and certified.

5. Whether the following annual returns have been filed?

1. Form D-2, required for every manufacturing business dealing with milk
products. 2
1
https://foodlicensing.fssai.gov.in/PDF/FoSTaC_uploading.pdf
2
FBO manufacturing Milk and/or Milk products shall file half yearly return in the Form
D-2 and submit it manually to the to the concerned Central/State licensing Authority
for the periods 1st April to 30th September and 1st October to 31st March of every
financial within a month from the end of the period
 2. Form D-1, required for (manufacturers and Importers) to be filed Annually
and submitted manually to the concerned Central/State licensing Authority on
or before 31st May of each year for each class of food handled by him during
the previous financial year.

2. 77 foods have 56 employees. List 5 different documents and information to be

requested with respect to the employees and employee-related compliance.
Ans.

1. Whether the company has one trained and certified Food Safety Supervisor for
every 25 food handlers or part thereof on all their premises as per the FSSAI
guidelines? (Reference to Answer 1, point number 4)

2. How many of the 56 employees are engaged full time and how many are engaged
part time?

For part-time employees, how many are bound by contracts and what kind of
termination clause exists in them?

For full-time employees, whether they have an employee agreement with the
company? And what kind of termination clause exists in their contracts?

In these contracts, what is the renewal procedure, whether it is annual or otherwise?

And if it is not annual then what is it and how many are to be renewed in the next
three years?

3. Whether the employees have a ‘labour union’? If yes, then has the labour union ever
sued the company for any dispute in the past?

4. What is the management structure of the company and what are the different levels
at which different employees work?

5. Whether there exists a mechanism/department by which the company deals with

sexual harassment complaints? And if yes, then, answer the following:
1. Explain the redressal mechanism in such cases, in brief.
2. Whether there have been sexual harassment complaints in the past or are there
any on-going sexual harrasment law suits going on?

3. List four different documents and also information to be requested with respect to
the insurance of the company.
Ans.

1. Whether the place/places that the company uses for its operations has the following:
1. Insurance for the premises. And if yes, then up to what extent will the insurance
agency cover the loss.
 Please explain in brief the operative part of the insurance policy that the company
has undertaken.

2. Please list all the different types of insurances related to the premises that the
company has undertaken.

2. Insurance for vehicles. Whether the company owns the different vehicles its uses for
supply, transportation, etc. in the course of business? If yes, then, whether they are
insured as per the local requirement of the law?

3. Whether the company has a Professional liability insurance? If yes, then what is the
standard that other companies in the industry use and what is the insurance that 77
Foods has taken?

4. List 3 different documents and also information to be requested from the company
with regards to the borrowings of the company
Ans.

1. Loan agreements - Taken from Banks, NBFCs or any other organisations.

2. Bonds - The bonds that the company has issued in the past.

3. Any personal loan taken by the management, or any other employee of the company
on behalf of the company, the default of which may make the company liable.

5. List 5 different documents and also information to be requested from the company
as regards the real estate properties of the company.
Ans.

1. List of all the properties owned by the company and whether they are:
1. Rented
2. On Lease
3. Owned
For properties owned, provide anything that may prove ownership.
For properties rented or on lease, provide the agreement governing the said rent or
lease.

2. List of all clearances required from the municipal corporation responsible in different
areas where the properties are located. Eg - clearance for setting up factories.

3. Documents establishing that Stamp Duty has been duly paid.

4. Whether, any of the properties owned are on Power of Attorney of someone else. List
of such properties along with their Power of Attorneys.
 5. Permission for lifts, if any, issued by the Inspector of Lifts, Office of the Electrical
Inspectorate;

6. Documents establishing that all the dues such as, but not limited to rent, electricity
and water bills are paid on time and there is no outstanding amount left in the form of
penalty or pending bill.

B. Prepare a list of points to be reviewed :

1. The company has provided you its charter documents (AoA, MoA and incorporation
certificate). Prepare a list of key points to be reviewed in each of these documents in
order to prepare observations for Seedling.
Ans. Key Points are:

1. In the MoA:
1. Objects clause, whether the working of the company is ultra vires to the objects
clause or not.
2. Liability Clause
3. Name Clause
4. Registered office clause

2. In the AoA:
1. Clauses related to remuneration of employees such as, but not limited to Directors,
managers, etc.
2. Clauses related to Meetings
3. Clauses related to Clauses related to appointment of Directors.
4. Clauses related to raising finance and discharging debts.
5. Whether the AoA, in general, is in furtherance of the objects stated in the MoA or
not.

3. Incorporation Certificate
- Whether various filings with regard to incorporation have been done with the RoC.

2. The company does not have any documents/applications in relation to the

intellectual property of the company. Prepare a list of actions to be taken to ensure
that the intellectual property of the company is secured and that it can be properly
transferred.
Ans.
Since, the company is in the business of manufacturing and selling snacks, it may have
Patents and Trademarks.
Patents for the machines that it has developed over the years and Trademarks for the
products that it sells.

Steps to be taken:
1. Contact the Patents and Trademarks Office where the prior registration has been
done. (Assuming that it has been done.) They usually have an office copy of such
 registrations.
If there has been no registration then make the deal subject to registration of such
Trademarks and Patents.

2. In the first case, where there has been registration of Patents and Trademarks, ask
77 Foods to get you an office copy of the same.

3. After getting the office copy, check whether those Trademarks and Patents are
transferable and then get them transferred in accordance with the deal of the
agreement.

Exercise 2: Draft a software due diligence requisition list

Livable Environmentals Private Limited (Livable) is a Mumbai based startup engaged

in designing, customising and retailing a software called ‘Emicheck’ engaged in
checking the carbon emissions in places such as residential homes, offices, public
halls and also marking and displaying the AQI as well as giving top 5 suggestions for
improving AQI with the expected effect on AQI by implementing each suggestion.

Purizone Devices Limited (Purizone), a Delhi based company manufacturing air

purifiers is looking to acquire Livable to expand its operations. However, it wants to
conduct a thorough due diligence of Livable from a software standpoint since it is
primarily interested in the product offerings of Livable.

Draft a requisition list for software related due diligence, comprising at least 15
different items.

Sr. No. Information Requested Remarks

1.