Part 1 - Business Documents Of course, you will need current financial statements, preferably several years of statements, and tax returns. A separate article will discuss the issue of whether these documents should be audited or unaudited, and other Sarbanes-Oxley kinds of issues. You will also need a confidential descriptive report, aka CDR, or the selling prospectus – the marketing materials that will help you sell the company. What should be included in the CDR, and who should write it, is yet another article.
Here is a list of commonly requested documents. You will need them at some point in the due diligence process.
• Company human resources policy manual.
• Agreements with major customers and vendors
• Corporate articles of incorporations and by-laws and stock certificate book
• Minutes of board and shareholder meetings.
• Copies of employment contracts for senior management, union, independent contractors, consultants
• Employee profit-sharing, insurance stock bonus, deferred compensation and severance plans
• Status of all intellectual property: patents, trademarks, copyrights, domain names, licensing agreements
• Copy of leases, title to property
• Payroll reports
• Inventory status and policies
• Accounts and notes payable and analysis
• Analysis of loan and mortgage debt
• Accounting procedures and practices
• Status of information technology systems
• Shareholder agreements
• Organization chart
• Environment review including hazardous material management air emissions, water quality, EPA issues and the like Although this list is long enough to be disheartening, it is not comprehensive.
Luckily, not all items will be required to sell your firm. But most of these documents will be required at some point during the sale. This is part of the reason that managers have a hard time selling and managing the company at the same time – the demand for documents can be as strenuous as litigation! Unfortunately, business brokers don’t usually prepare, edit, review or approve these documents.
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