Due Diligence checklist: investment (start up)
Legal due diligence checklist for an investment in a start-up company, for a company which has not commenced trading or has only traded for a limited period.
Read moreWhen 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
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
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Updated by a lawyer on 12/09/2024
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