Due Diligence checklist: investment (start up)

When do I use this document?

• for the legal due diligence for an investment transaction
• where the subject company is a start-up company or has a limited trading history
• as initial requests for the company to answer and provide supporting documents

What are the key features?

• requests in tabular form, with the company’s answers to be inserted in the table
• requests covering 10 key subject areas, including:
  • corporate
  • contracts
  • litigation and compliance
  • assets
  • intellectual property
  • commercial property
  • employees
  • finance and insurance
  • taxation
  • business plan/forecasts

What else do I need to know?

In evaluating a start-up company, investors typically focus on:

• share capital: verifying the number of issued shares and shares reserved or granted as share options
• funding: understanding how the company has been financed, including loans from the founders or family members which may need to be converted to equity
• founder service contracts: investigating whether the founder(s) have service contracts, committing them to the business and including post-termination restrictive covenants and intellectual property protections
• intellectual property: checking that externally developed intellectual property is owned by the company
• business plan and projections: scrutinising the preparation and basis of the company’s business plan, forecasts and projections