Sample Diligence Requests
Appendix: Sample Diligence Requests
This is a list of documents and information you may be asked for during diligence.
Employee Benefits
| All corporate policies, manuals and employee handbooks. |
| All employee benefit, pension, health, deferred compensation, bonus, profitsharing, equity appreciation, option grants or severance arrangements or plans. |
| Collective bargaining and other labor agreements, together with a description of any significant labor problems or union activities that the Company has experienced including human rights or similar complaints. |
| Description of management loans (if any). |
| Employee and independent contractor census chart that includes the current salary/wage rate, exempt/non-exempt status, job function and part-time/fulltime status. |
| Employment, consulting, severance or other similar agreements. |
| Form of confidentiality, non-competition, non-solicitation and/or invention agreements for employees. |
| Indemnification agreements (if any). |
| All employee benefit, pension, health, deferred compensation, bonus, profitsharing, equity appreciation, option grants or severance arrangements or plans. |
Contracts
| Agreements under which the amount payable by Company is dependent on the revenue, income or similar measure of Company or any other person or entity. |
| Agreements with any governmental entity. |
| Agreements with respect to mergers, acquisitions or divestitures. |
| Agreements with respect to which Company has any liability or obligation involving more than $50,000, contingent or otherwise. |
| Agreements with retailers, distributors and re-sellers. |
| Agreements with the Company’s important vendors and suppliers, including |
| Agreements with respect to (i) hosting or co-location facility services and (ii) providers of services or products that the Company resells. |
| All affiliate or inter-company contracts and arrangements (including directors, officers, investors and family members, including any entities owned or controlled by the foregoing). |
| All other material contracts not provided in response to the above. |
| Strategic alliance, OEM, channel partner, joint development, joint research, joint venture, partnership or similar agreements. |
| Agreements that place any material limitation on the business of Company or that contains any exclusivity, “most favored nation”, non-competition, nonsolicitation, price restriction, right of first refusal or similar provisions. |
| All agreements with the Company’s important vendors and suppliers, including all agreements with respect to (i) hosting or co-location facility services and (ii) providers of services or products that the Company resells. |
Facilities
| All documents relating to leased property (personal or real). |
| All documents relating to real property owned by the Company (if any). |
| All documents relating to leased property (personal or real). |
Finances - Overview
| All documents relating to securities including (a) the voting, purchase, repurchase, issuance, registration or sale thereof and (b) all documents related to any prior financings involving a Company. |
| All Section 409A reports and other appraisals of the Company’s securities. |
| Detailed capitalization table listing the current holders for each series and class of security, including options, warrants and equity appreciation rights. |
| Warrants, options, convertible notes and any other rights to acquire securities. |
Organizational
| All corporate governance documents (LLC Agreement, side letters (if any)) for the Company, and if applicable, its subsidiaries. |
| Legal entity chart of the Company and its subsidiaries, if any. |
| List of all managers, directors and officers of the Company. |
| Minutes of meetings and actions of the Company’s manager(s), director(s) or any committee thereof and the Company’s security holders. |
| Legal entity chart of the Company and its subsidiaries, if any. |
| All corporate governance documents |
| List of all managers, directors and officers of the Company. |
| Employment, consulting, severance or other similar agreements. |
| Form of confidentiality, non-competition, non-solicitation and/or invention agreements for employees. |
| All corporate policies, manuals and employee handbooks. |
| Employee and independent contractor chart that includes the current salary/ wage rate, exempt/non-exempt status, job function and part-time/full-time status. |
Financies - Quality of Earnings
| A/P agings as of each Year-end, Interim, and most recent period available |
| A/R agings from the billing system as of Year-end, Interim, and most recent period available. Provide commentary as to collectability of accounts aged greater than 90 days past due as of January 2023. |
| Bank reconciliations for all cash accounts for each month-end from January 2020 through January 2023 |
| Capex budget for current and subsequent fiscal years |
| Contracts for top 5 customers |
| Copies of all employment and union agreements, if applicable. |
| Copies of all facility and operating leases including the most recent future minimum payment schedules. |
| Copies of bank statements for all cash accounts for each month from April 2020 through January 2023 |
| Copies of monthly financial statements for Delivery Duty Paid |
| A/P agings as of each Year-end, Interim, and most recent period available |
| A/R agings from the billing system as of Year-end, Interim, and most recent period available. Provide commentary as to collectability of accounts aged greater than 90 days past due as of January 2023. |
| Description of any commitments, contingencies and guarantees |
| Detail of all A/R write-offs during Delivery Duty Paid. Please identify when the original revenue was recorded. |
| Detail of credits in A/R as of Year-end and Interim |
| Detailed analysis of key metrics used by Management for Delivery Duty Paid |
| Detailed listing of additions and disposals for Delivery Duty Paid |
| Detailed listing of cash disbursements (checks, wires, ACH, EFT, etc) for |
| Delivery Duty Paid including date, vendor name, and amount |
| Detailed monthly WIP schedules for completed and in process projects throughout Delivery Duty Paid including total contract value, estimated costs, and estimated GM, costs incurred to date (Mat, Lab, & OH), revenues recognized to date, and billings to date |
| Bank reconciliations for all cash accounts for each month-end from January 2020 through January 2023 |
| Capex budget for current and subsequent fiscal years |
| Contracts for top 5 customers |
| Copies of all employment and union agreements, if applicable. |
| Copies of all facility and operating leases including the most recent future minimum payment schedules. |
| Detailed support for prepaid assets (expenses and health insurance) as of Yearend and Interim |
| Detailed support for Service WIP as of Year-end and Interim |
| Provide commentary as to payment status of accounts aged greater than 90 days as of January 2023. |
| General ledger transaction detail for Delivery Duty Paid |
Financies - Tax
| Contact information for and access to the internal personnel and external advisors responsible for all U.S. federal, state and local income and all other non-income (payroll, etc.) tax matters with respect to the Company. |
| Copies of all federal, state, local, and foreign income and franchise tax returns filed for the Designated Timeframe. |
| Copies of detailed trial balances (showing individual Company detail if consolidated) for the Designated Timeframe. (Tax only engagements) |
| Copies of financial statements for the Designated Timeframe with footnotes and any relevant supporting schedules. (Tax only engagements) |
| Details of any anticipated pre-transaction restructurings that will occur in connection with the proposed transaction. To the extent available, Provide any structuring decks, organizational structure charts, tax analysis, and/or valuations prepared in connection with the anticipated pre-transaction restructurings. |
| Documents related to acquisition or merger activity in the past |
| Documents related to amended federal, state or local tax returns for the Designated Timeframe |
| Documents related to any nexus questionnaires |
| Documents related to any outstanding credit balances for an extended period of time or any material outstanding checks or any other abandoned items |
| Documents related to any US federal, state, and local tax audits |
| Documents related to changes to corporate structure during the Designated Timeframe |
| Documents related to entities related to the Company by common ownership |
| Documents related to payroll tax returns |
| Documents related to real property tax in the states where real property exists |
| Documents related to the Company's tax advisor(s) |
| Documents related to the Supreme Court's decision in South Dakota v. Wayfair |
| Documents related to theCompany taking the position that it is not subject to income tax under P.L. 86-272 in any states |
| Documents related to uncertain or unusual tax positions |
| Documents related to unclaimed property reports with any jurisdictions |
| Explanation of policy for withholding income taxes on nonresident employees performing services in other jurisdictions. |
| Including extensions, were any of the Company's federal, state, and local tax returns for the Designated Timeframe filed late? (income, franchise, gross receipts, payroll, sales and use, property tax) |
| Describe the Company's organizational and ownership structure. If available, |
| Provide an organizational chart illustrating the ownership structure. |
| List in which states and local jurisdictions the Company is currently filing tax returns noting the years filed and the type of tax. |
| Provide a copy of any nexus analysis and/or ASC 740-10 (FIN 48) analysis reports. |
| Provide a list of states where the Company is registered for sales and use tax purposes. |
| Does the Company collect sales tax from customers in any state? |
| Provide a list of tax functions performed in-house v. the tax advisor or a thirdparty professional. |
| Provide a listing of any state, local, or other incentives. |
| Provide a schedule of payroll by state based on the location of the employees. |
| Provide a schedule of property based on location of the property that includes personal property owned, real property owned, and total rent by state for both real and personal property. |
| Provide a summary of closed, ongoing, and pending US federal, state, and local tax audits (e.g., income, payroll, sales and use, excise) for the past six years. |
| Provide apportionment information for any flow-through entities that the Company owns or has owned in the Designated Timeframe. Explain how these factors were used in determining overall apportionment for the Company. |
| Provide copies of all tax returns. |
| Provide the articles of incorporation or organization. |
| Provide the states where the Company's employee or independent contractors traveled during Designated Timeframe |
| Schedule indicating and explaining any changes in SUTA rates. |
| Statement indicating state residency of all shareholders. |
Intellectual Property
| Agreements relating to intellectual property rights, options to intellectual property rights, research and development, licenses, inventions or other interests in intellectual property. |
| Agreements requiring or providing for the deposit into escrow or disclosure of the Company’s source code or other technology. |
| Agreements with independent contractors or consultants relating to the development of intellectual property owned or used by the Company. |
| All license agreements (as licensor or licensee). |
| Any post-grant proceedings or other challenges of an issued patent or registered trademark before a US or foreign patent and trademark office. |
| Correspondence or other documentation dealing with actual or alleged infringement of patents, trademarks, copyrights, trade secrets or other IP rights, including any “cease and desist” or “invitations to license” letters. |
| Identify all material third party software used by the Company. |
| Identify and describe any restrictions or limitations regarding the use, sale, distribution, commercialization or exploitation of any IP. |
| List of all domain names registered to or used by the Company. |
| List of all patents, trademarks, service marks, registered copyrights and other registered intellectual property (“IP”) owned by the Company and applications and registrations for any of the foregoing types of IP. |
| List of all proprietary software owned by the Company, indicating whether such software was developed by Company employees or contractors or acquired from a third party. |
| All agreements with independent contractors or consultants relating to the development of intellectual property owned or used by the Company. |
Legal
| Current reserves for litigation and other contingencies. |
| Litigation files, including pleadings, for all existing matters. |
| Provide any settlement agreements for the past three years. |
| Provide copies of any outstanding judgments, decrees, injunctions, consents, orders, etc. requiring payment or limiting the business. |
| Schedule of all threatened or pending litigation and investigations. |
| List of all patents, trademarks, service marks, registered copyrights and other registered intellectual property (“IP”) owned by the Company and applications and registrations for any of the foregoing types of IP. |
IT and Data
| Description of the types of information collected and stored by the Company relating to its customers. |
| Descriptions, summaries, complaints and other documents related to data privacy breaches or alleged breaches. |
| Logs or summaries of all material complaints received by the Company regarding data privacy or data security in the past three years, as well as any unresolved complaints regardless of age. |
| Indicate whether the Company undertook any policy or operational changes in connection with the California Consumer Privacy Act (CCPA). |
| Risk assessments and internal or external audit reports addressing the Company’s privacy and data security controls. |
| The Company’s internal policies and procedures related to information security, including any policies addressing system/network security; data classification; data retention; data security breach incident response; access controls; and disaster recovery/business continuity. |
| List of all domain names registered to or used by the Company. |
| Identify all material third party software used by the Company. |
| The Company’s internal policies and procedures related to information security, including any policies addressing system/network security; data classification; data retention; data security breach incident response; access controls; and disaster recovery/business continuity. |
| Risk assessments and internal or external audit reports addressing the Company’s privacy and data security controls. |
