Due Diligence Questionnaire

This legal due diligence questionnaire can be used by a person proposing to acquire the entire issued share capital of a particular target company (the Target Company) or a substantial part of it (whether by means of a share purchase or share subscription).

This due diligence questionnaire, while comprehensive, is designed for use in respect of all companies generally. If there are specific issues relating to the Target Company that require specific investigation, you may need to add some additional questions to the due diligence questionnaire. For example, if the target company is an authorised financial intermediary, specific questions will need to be asked in relation to the company’s authorisations, licences and regulatory status. You should supplement the questions in this due diligence document where necessary to tailor it to the specific transaction in question.

This due diligence questionnaire contains a specific set of questions which a proposed buyer will raise with the seller/board of the Target Company in order to obtain information and copy documents in relation to the Target Company and its business.

The due diligence replies and information received by the buyer in response to the legal due diligence questionnaire will assist the buyer in assessing and evaluating the Target Company.

Where issues are identified in the due diligence replies, they will often be addressed by means of the inclusion of warranty or indemnity protection in the share purchase agreement or share subscription agreement. For example, if there was a concern in relation to the holding of certain intellectual property rights by the Target Company, a warranty could be included pursuant to which the seller will warrant that the Target Company holds those specific rights. If it turns out post acquisition that the target doesn’t actually hold those rights, the buyer will be able to take a warranty claim against the seller to recover any amount by which the value of the company is reduced due to it not having those intellectual property rights. Similarly, if an indemnity is obtained from the seller, the buyer will simply be able to demand payment of any such amount from the seller without the need to prove a claim for breach of warranty in court.

Having completed the due diligence exercise, the buyer/subscriber should be in a position to make an informed decision to either:

(i) proceed with the proposed acquisition on the terms tentatively agreed;

(ii) agree additional or revised terms in relation to the acquisition of the Target Company or shares in it having regard to any legal issues identified from the due diligence exercise;

(iii) try to renegotiate the terms of the purchase/subscription to reflect any issues or liabilities identified during the due diligence process; or

(iv) withdraw from the transaction in its entirety.

For further information on due diligence, visit our learning centre.

Areas Covered by this Due Diligence Questionnaire:

• Group Structure and Constitution
• Assets
• Banking
• Financial Commitments
• Trading Arrangements
• Contractual Arrangements
• Permits / Grants / Licences
• Freehold and Leasehold Property
• Directors and Employees
• Pensions
• Intellectual Property
• Litigation
• Environmental
• Health and Safety
• Insurances
• Information and Communications Technology
• Stock and Suppliers
• Tax
• Accounts and Financial Statements

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