Introduction
Due diligence is an inspection and risk assessment of an upcoming business transaction basically; it is a background check to make sure that the parties to the transaction have the required information they need, to proceed with the transaction. A proper due diligence is required to reveal misrepresentation and fraudulent dealings in a major business transaction.
Due Diligence is the process by which confidential, legal, or financial and other material information are exchanged, reviewed and appraised by the interest parties who are going to enter into a Business transaction. Due diligence often refers to the in-depth research and study being done before signing an agreement or a business with a party.
Objectives
Due diligence seeks to detect flaws within the firm, particularly those that may result in unanticipated obligations in the future.
Types
Due Diligence can be General, i.e. covering all the aspects of the business or area specific like, Financial, Legal, Human Resource.
Documents Requirement
The following is the list of documents required for General Due Diligence –
| List of Documents for due diligence |
| Corporate Documents |
| Memorandum of Association |
| Articles of Association |
| Certificate of Incorporation |
| Shareholding Pattern |
| All filed Financial Statements |
| List of Directors |
| List of Shareholders |
| Statutory Registers (Whichever is applicable) – Register of Member, Register of Debenture Holders, Index of Members & Debenture-Holders, Register & Index of Beneficial Owner, foreign Register of Members, Debenture Holders, Other Security Holders or Beneficial Owners Residing Outside India, Registers of Renewed & Duplicate Share Certificates, Registers of Sweat Equity Shares, Registers of Employee Stock Option (ESOP), Registers of Securities Bought Back, Registers of Deposits, Registers of Charges, Registers of Directors & Key Managerial Personnel (KMP) And Their Shareholding, Registers of Loan & Guarantee, Registers of Investments of The Company Not Held in Its Own Name, Registers of Contracts & Arrangements in Which Directors Are Interested |
| Minutes of Board meetings including Attendance register, leave of absence, Notice of Meeting or Consent for shorter notice (if any) (last three years) |
| Minutes of Shareholders meetings Attendance register, leave of absence, Notice of Meeting or Consent for shorter notice (if any) (last three years) |
| List of MSME Suppliers |
| Shops and Establishment Registration certificate |
| Factories Act Registration |
| Litigation and Regulatory Matters Documents |
| Details of all pending, threatened litigation, inquiry, investigation against the Company and/or its Directors and Promoters |
| Details of show cause notice, demand notice or any correspondence received from government bodies |
| Any judgments, decrees, settlements, consent decrees, orders or decisions rendered by courts, authorities and/or arbitration tribunals in relation to, or having implications on the Company |
| Details of any criminal proceedings initiated by / pending against Company and / or its promoters, directors and key managerial personnel, or other employees or officers. |
| List of any prior, pending or threatened action against the Company related to unfair labor practice, wrongful dismissal or termination of any employee, violation of any human rights, etc. |
| Taxation Documents |
| All filed Income tax returns |
| TDS registration |
| Filed TDS Returns |
| GST Registration Certificate |
| Filed GST Returns |
| Employment Related Documents |
| Number of employees (Male and Female) |
| Employee State Insurance Registration |
| Employee State Insurance Payments and Filed returns |
| Provident Fund Registration |
| PF Payments and Filed Returns |
| HR policies (any and all of them) |
| Employees contact and other information |
| Material Agreements and Contracts |
| All material agreements executed with the Customers, Clients, Holding Company, Subsidiary Company, Joint Venture Agreements etc. |
| All material agreements that the Company has executed with the Investors and/or Shareholders like Founder’s Agreement, Share Transfer Agreement, Share Subscription Agreement, Investment Agreement etc. |
| All material agreements that Company has executed with the Directors, Key Managerial Personnel, Holding-Subsidiary Company, Employees etc. |
| Copies of any agreement pertaining to provisioning of commission, revenue share, brokerage, finders’ fee, or any other arrangement relating to capital issuance and raising of investments. |
| Copies of technical collaboration agreements, technology license agreements, IT agreements, data processing agreements, intellectual property development, assignment, ownership and/or licensing agreement, website design, development, trademark license agreements, technical assistance agreements or other co-operation and any arrangements with individuals or government. |
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