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due-diligence-checklist

Drafts due diligence checklists for U.S. corporate transactions (M&A, asset purchases, investments, JVs, restructurings). Covers corporate structure, financials, tax, contracts, IP, litigation, employment, benefits, insurance, and environmental compliance. Surfaces change-of-control triggers, consent requirements, and red flags. Use when preparing for deal closing, board presentations, or investor disclosure.

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Due Diligence Checklist

Generates a structured, transaction-ready due diligence checklist for U.S. M&A and corporate transactions.

Quick Start

Collect before drafting:

  1. Transaction type — merger, acquisition, asset purchase, investment, JV, or restructuring
  2. Target — company name, incorporation/operation jurisdictions
  3. Timeline — anticipated closing date
  4. Scope — business units, subsidiaries, time periods, materiality thresholds
  5. Priorities — known concerns, industry-specific risks, regulatory focus

Output each line item as: Item | Documents Requested | Received (Y/N/Partial) | Issues/Notes

Checklist Sections

1. Corporate Structure & Governance

  • Formation docs (articles, bylaws, amendments), good standing certificates
  • Cap table, stock ledger, shareholder agreements, voting trusts, transfer restrictions
  • Subsidiary org chart with formation docs and ownership % for all subs/affiliates/JVs/VIEs
  • Board and shareholder minutes (last 3 years); resolutions authorizing the transaction

Red flags: Governance irregularities, corporate formality gaps, piercing-the-veil risk, conflicted approvals.

2. Financial Records & Tax

  • Audited financials (3–5 years): balance sheets, P&L, cash flow, footnotes, management letters
  • Interim financials (current period + prior-year comparable)
  • Tax returns (federal, state, local, foreign); audits, assessments, open examinations
  • AR/AP aging, debt schedule with covenant compliance, off-balance-sheet obligations
  • Revenue recognition policies, related-party transactions, restatements

Red flags: Covenant defaults, audit qualifications, restatements, contingent liabilities, aggressive revenue recognition.

3. Material Contracts

  • Top customer/supplier contracts; change-of-control and consent provisions
  • Distribution, franchise, dealer, referral agreements
  • Real property leases (options, renewal, assignment restrictions); deeds for owned property
  • Equipment/capital leases, financing arrangements
  • Loan agreements, credit facilities, security agreements, guarantees
  • JV agreements, partnership agreements, NDAs, settlement agreements

Red flags: Change-of-control triggers, consent requirements, acceleration clauses, unusual indemnification, oral agreements, post-termination obligations.

4. Intellectual Property & Technology

  • Registered IP: patents, trademarks, copyrights, domain names
  • Trade secrets, know-how, common law marks
  • All IP licenses (in/out): exclusivity, territory, royalties, termination rights
  • Assignment agreements from founders, employees, contractors
  • Software licenses (proprietary + open source), SaaS/cloud agreements, DPAs

Red flags: Unassigned founder IP, GPL/AGPL copyleft conflicts, freedom-to-operate gaps, missing work-for-hire agreements.

5. Litigation & Regulatory

  • Pending lawsuits, arbitrations, mediations (status + exposure)
  • Demand letters, cease-and-desist, threatened claims
  • Agency investigations, consent decrees, administrative proceedings
  • Settlement agreements, ongoing monitoring obligations
  • Operating licenses/permits (expiration, violations)
  • Regulatory compliance: antitrust, export controls, FCPA/UK Bribery Act
  • Data privacy: GDPR, CCPA, HIPAA — policies, breach history, DPAs
  • Whistleblower complaints, internal investigations

Red flags: Unquantified exposure, systemic compliance failures, successor liability risk, required regulatory approvals for closing.

6. Employment, Labor & Benefits

  • Employee census: headcount by role, compensation, location, status (EE/contractor/PT)
  • Key employee agreements, offer letters, severance, equity grants
  • Non-competes, non-solicits, confidentiality agreements
  • Employee handbook, leave policies (FMLA, state leave)
  • 401(k)/pension docs, Form 5500, funding status; health/welfare plan summaries
  • Equity plans (options, RSA/RSU), vesting schedules; bonus/commission plans
  • Union contracts, CBAs, NLRB charges
  • Employment claims: discrimination, wage/hour, misclassification

Red flags: Misclassified contractors, 409A violations, underfunded pensions, change-of-control severance triggers, key-man dependency.

7. Assets, Insurance & Risk

  • Real property: deeds, title insurance, surveys, zoning, Phase I/II environmental
  • Personal property: equipment list, liens, UCC filings, security interests
  • Insurance: GL, E&O, D&O, property/casualty, cyber, industry-specific
  • 5-year claims history; contingent liabilities (warranty, product liability, indemnification)
  • DR/BCP plans, crisis protocols

Red flags: Coverage gaps, claims-made vs. occurrence tail exposure, uninsured losses, liens on key assets.

8. Environmental, Health & Safety

  • Environmental permits: air, water, waste, hazmat (all jurisdictions)
  • Phase I assessments (all owned/leased); Phase II where concerns identified
  • Compliance history: violations, NOVs, consent orders, remediation
  • Hazardous materials: generation, storage, disposal records, manifests
  • OSHA 300/300A logs (5 years), citations, safety programs
  • ESG: carbon/sustainability commitments, climate risk disclosures

Red flags: CERCLA/Superfund exposure, ongoing remediation, unresolved NOVs, ESG obligations creating future compliance burdens.

Closing Summary

Conclude every checklist with:

  • Critical Findings — material risks requiring deal-team escalation
  • Required Consents/Approvals — third-party, regulatory, or lender consents to close
  • Recommended Follow-Up — specialist engagement (environmental, benefits, IP)
  • Open Items — documents requested but not yet received

Pitfalls

  • Tailor scope to transaction type: asset purchases → assumed liabilities and excluded assets; investments → cap table, anti-dilution, governance rights
  • Adjust materiality thresholds to deal size and industry
  • Flag oral agreements — they create successor liability risk
  • For cross-border targets, flag jurisdiction-specific requirements (foreign investment review, local labor law, non-US tax)
  • Do not render legal opinions — flag issues for attorney review
  • Verify all regulatory citations for applicable jurisdiction and year [VERIFY]

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