Legal Due Diligence Checklist: NewCo Company
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Legal Due Diligence Checklist: NewCo Company Peter Giannoulis Law 529: Legal Environment of Business Instructor: Carol Parker Wednesday, May 25, 2005 Legal Due Diligence Checklist: NewCo Company Our venture capital firm aspires to invest in newborn companies such as NewCo, who coupled by a driven team of managers can develop the company into a notable economic contributor. The assistance of venture capital will automatically advance the equity value of the emerging NewCo Company. In order to consider investing into the NewCo Company, our venture capital firm will meticulously examine the business and technical merits of this organization. Initially, we will review the market demand for the service or product offered by the proposed company. Additionally, we will check the history of the founders of the company, particularly in the area of finance in previous business enterprises. Furthermore, we place great importance in investigating the immediate competition that the proposed company will face when entering the market. Next, representatives from the venture capital firm will conduct discussions with primary customers to the company.
"Litigation 1. Copies of any pleadings or correspondence for pending or prior lawsuits involving the Company or the Founders. 2. Summary of disputes with suppliers, competitors, or customers. 3. Correspondence with auditor or accountant regarding threatened or pending litigation, assessment or claims. 4. Settlement documentation" (Due Diligence Checklist, 2005). (D) "Employees and Related Parties 1. A management organizational chart and biographical information. 2. Summary of any labor disputes. 3. Correspondence, memoranda or notes concerning pending or threatened labor stoppage. 4. List of negotiations with any group seeking to become the bargaining unit for any employees. 5. All employment and consulting agreements, loan agreements and documents relating to other transactions with officers, directors, key employees and related parties. 6. Schedule of all compensation paid to officers, directors and key employees for most recent fiscal year showing separately salary, bonuses and non-cash compensation (i.e. use of cars, property, etc.). 7. Summary of employee benefits and copies of any pension, profit sharing, deferred compensation and retirement plans.
Taking the above factors into consideration will account for a small percentage for predicting the success of the proposed company (Business Angels Network, 1999). The onus is to avoid dealing with companies that have demonstrated ethically, socially or environmentally irresponsible organizations in the past. The venture capital firm will use the due diligence checklist before an official commitment is made, to provide a safeguard against a company with past criminal activity, a company induced with corruptive practices, a company with damaged reputation (socially and financially), and a company with breaches of legislation. In essence, due diligence will predict the future of the company once the deal has closed between the proposed company and the venture capital firm. An investigative firm such as ours will do a thorough job to avoid any future surprises from the acquisition, thereby approving a company that presents opportunities for synergies, innovative research and development and dispersions to a wider array of the market. Becoming familiar with a company's history is a key component of making a constructive and secure decision that will be tailored to the needs of NewCo and our firm.
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