Mbm Commercial Llp

DUE DILIGENCE QUESTIONNAIRE

[ insert details of target company ] (“the Company”)

Relating to a possible Investment in the Company by [XXXXX]

These enquiries are designed to assist in the due diligence exercise to be undertaken in connection with the possible investment in the Company.

Please supply full details of all the items specified below including, in those cases where documents are available, accurate and up-to-date copies of those documents.

Responses to this information request list are not disclosures for the purposes of any warranties in the legal documents relating to the investment in the Company.

It should be noted that all references to “the Company” below include references to each of its subsidiaries (if any).

DOCUMENT INFORMATION REQUIRED RESPONSE NUMBER

1. INCORPORATION AND STATUTORY MATTERS

Please send us the statutory books of 1.1. the Company for inspection (which should be up to date).

1.2. Details of the directors and officers of the company, stating job title, any other directorships and business interests held, together with a management structure chart including lines of command.

A list of the names of the Company’s 1.3. authorised signatories and the terms of their authority.

Details of the registered office and other trading addresses, branches, 1.4. agencies or permanent establishments.

Details of any subsidiaries or holding companies and their registered 1.5. number, and a Company structure chart.

Details of any of the following 1.6. insolvency proceedings and insolvency-related matters:

any order made, petition presented, meeting convened or resolution passed for the winding up of the Company, or any receiver 1.6.1. appointed or any distress, execution or other process that has been levied in respect of the assets of the Company;

1.6.2. any order that has been made by or petition presented to the court for the appointment of an administrator in respect of the Company; and

any circumstances which have given or may give rise to any 1.6.3. insolvency proceedings against the Company.

2. SHARE CAPITAL AND SHAREHOLDERS

The authorised and issued share capital of the Company, including classes of shares, how they are 2.1. divided, whether they are fully paid up and the voting rights attaching to shares.

The names and addresses of all registered and beneficial shareholders, 2.2. showing number of shares held (and related percentage of the issued share capital).

Details of any loan notes or stock issued or agreed to be issued by the 2.3. Company, and a copy of the instrument.

2.4. A list of all options proposed to be granted or granted over the share capital of the Company, if any, including names and addresses of existing and proposed option holders (including staff members) and the numbers of options held or to be held by each.

Details of any repayments of capital or 2.5. capitalisation issues.

Details of any restrictions on who can 2.6. hold shares in the Company.

Details of all schemes or agreements for the acquisition, disposal or subscription of any share or loan 2.7. capital of the Company or the capital of any other company which is binding on the Company.

Details of any claims, liens, charges, equities, encumbrance or adverse 2.8. rights affecting any shares in the Company (eg Bond & Floating Charge).

Details of all shareholders agreements or agreements (including any other kind of agreement relating to the 2.9. management of the Company, voting, transfer of shares, or the appointment or removal of directors) affecting the Company.

Copies of the Company's annual 2.10. returns since its incorporation.

2.11. Names of all companies (other than the subsidiaries of the Company) in which the Company owns or has agreed to subscribe for any shares or stock including loan stock and where appropriate stating percentage and particulars of total issued capital held and the book cost of the investment.

3. LITIGATION

Details of and copies of relevant documents relating to any existing, 3.1. threatened and/or pending arbitration and/or litigation and/or other dispute with amounts involved.

Details of any governmental or official investigation or enquiry concerning the Company, and of any occurrences 3.2. which have led, or which might lead to, any prosecutions or proceedings before any court or administrative tribunal or other authority.

Details of any existing or pending judgements, awards, decisions, writs, 3.3. injunctions, decrees or court orders affecting the Company within the last five years.

Details of any general or specific provision made by the Company in 3.4. relation to the recovery of outstanding book debts.

3.5. Details of anything which may give rise to any investigation, enquiry or enforcement proceedings or process in relation to the Company by any governmental, administrative or regulatory body.

4. FINANCE

Copies of the Company’s accounts and 4.1. directors’ reports since incorporation.

Copies of all other relevant financial information for the Company or the 4.2. Company's Group including management accounts for the last three financial years.

Confirmation of the Company’s 4.3. accounting reference date.

Copies of any current budget, forecast or business plan (whether in final form 4.4. or not) prepared in respect of the Company.

Details of any material change in the business or prospects of the Company 4.5. occurring since the date of the last accounts of the Company.

Name(s) and address(es) of the 4.6. Company's bank(s).

4.7. Details and copies of documents relating to all bank facilities and accounts (including bank statements for the last three years and copies of all existing mandates) in relation to the Company.

Details and copies of documents relating to the current level of overdraft, 4.8. loan, credit facilities and other borrowings by the Company.

Details and copies of all documents relating to any grants, subsidies or 4.9. financial assistance given to the Company (whether by Government body or otherwise).

5. TRADING MATTERS

Any business or trading names and any registrations or applications for registration of trade marks and/or 5.1. service marks and/or domain names and relevant licences and sub- licences.

All agreements in connection with the Company’s business which cannot be 5.2. terminated on three months’ notice or less without payment of compensation.

Details of any transactions between the Company and the shareholders or 5.3. any of the directors or any companies connected with any of them within the last five years. List of major customers (those accounting for more than 10% of 5.4. turnover of the company), identifying product and/or goods or services supplied.

List of major suppliers (those accounting for more than 10% of 5.5. goods supplied to the Company), and alternative sources of supply.

All debt factoring or similar 5.6. arrangements entered into by the Company.

Any studies, reports or analyses of the Company, its business strategies, business plans, financial concerns or 5.7. prospects prepared by the Company, management consultants, and/or other individuals/companies within the last three years.

A list of all regional or national 5.8. competitors.

Details of all product returns and 5.9. recalls and customer complaints as to product quality, service or otherwise.

6. CONSENTS & COMPLIANCE

6.1. Details and copies of all necessary licences, consents, concessions, registrations, approvals, permits, exemptions, agreements, arrangements and authorities (public and private) ("Consents") required for the operation of the business of the Company, including:

whether the Consents are valid 6.1.1. and subsisting;

dates for renewal of the 6.1.2. Consents;

any onerous conditions 6.1.3. attached to the Consents; and

any reason for the Consents to 6.1.4. be suspended or cancelled or revoked.

Details of any circumstance, event, act or omission which might give rise to the assertion that the Company or any of its officers, agents or employees have done or omitted to do any act or thing which is or could be in 6.2. contravention or breach of or the subject of inquiry, investigation or proceedings under the provisions of any statute, order or regulation made in any relevant jurisdiction giving rise to any fine, penalty, default, proceedings or other liability.

6.3. Details of whether all legislation and all orders, provisions, directions and conditions relating to the Company (including VAT) have been complied with in all respects.

7. CONTRACTS

Details and copies of any joint venture 7.1. agreement or arrangement to which the Company is party.

Copies (or details where copies are not available) of any agreement, contract, 7.2. transaction, obligation, commitment, understanding, liability or arrangement (written or oral) of the Company which:

is material to the business of 7.2.1. the Company; or

is entered into otherwise than in 7.2.2. the ordinary and usual course of business; or

is of an unusual or abnormal 7.2.3. nature, or not fully on an arm's length basis; or

is for a fixed term of more than six months, or incapable of performance in accordance with its 7.2.4. terms within six months after the date on which it was entered into or undertaken; or

7.2.5. is incapable of termination in accordance with its terms by the Company on 60 days’ notice or less; or

is likely to result in a loss to the 7.2.6. Company on completion of performance; or

cannot readily be fulfilled or performed by the Company on time 7.2.7. without undue or unusual expenditure of money or effort; or

requires the Company to pay or 7.2.8. receive consideration in excess of £25,000; or

involves the supply of goods or services, the aggregate sales value of which will represent in excess 7.2.9. of 10% of the anticipated turnover of the Company in the next 12 months.

Copies of all standard terms and 7.3. conditions of sale or purchase currently used by the Company.

Copies of all agreements with the Company which cannot be terminated 7.4. on one month's notice without payment of compensation.

7.5. Copies of contracts for the sale of any product, or the provision of any service, by the Company which have more than six months to run or under which any discounts or special terms are being granted to customers.

Details of all credit arrangements in favour of any customer of the 7.6. Company who has been granted a payment term of more than 30 days or any special discount.

Details of all capital commitments under contracts binding on the 7.7. Company for the supply and sale of goods or equipment exceeding £1,000 in value.

A list of all major customers (that is, customers accounting for more than 5% of turnover for the Company) and major suppliers (that is, suppliers accounting for more than 5% of goods supplied to the Company) and details of agreements with those customers 7.8. and suppliers, including details of the value of sales in the last year for major customers and the value of goods supplied in the last year for major suppliers and copies of any standard terms of business used by those customers and suppliers.

7.9. Copies of all hire purchase, rental, leasing or similar agreements entered into by the Company or to which it is subject.

Copies of all licences, franchising, merchandising, marketing, purchasing, 7.10. manufacturing, factoring, agency and distribution agreements entered into by or on behalf of the Company.

Details of any negotiations of material 7.11. importance to the Company that are currently in progress.

Details of any outstanding quotation or 7.12. tender for a contract that would fall within paragraph 7.2 above.

Copies of any contracts or arrangements currently in operation which are liable to termination or 7.13. alteration on the change of control of the Company, or where the consent of third parties is otherwise required to such change of control.

Details of any default or alleged default 7.14. by the Company or any party to any agreement with the Company.

Details of any products manufactured, sold or distributed by the Company which are or may become defective or 7.15. do not comply with any express or implied warranties given by the Company. Details of any confidentiality undertakings given by the by the Company and whether those 7.16. undertakings will be breached by providing the information requested in this request list.

Details of contracts or arrangements that have been entered into with any entities or persons connected (directly 7.17. or indirectly) with the Company, including any director or shareholder of the Company.

8. INSURANCE

Details of all current Insurance Policies, detailing the date of the last renewal, the next renewal dates, 8.1. annual premiums, the amount of cover, the property covered, the nature of the cover and the name of the insurance company.

Details of all claims made by the 8.2. Company within the last five years whether paid or outstanding.

8.3. Are there any circumstances likely to give rise to a claim under insurance policies held by the Company and has anything been done or omitted to be done which has made or could make any policy of insurance void or voidable, its renewal refused or its premiums likely to be increased?

INTELLECTUAL PROPERTY

In this section "IPR" means all patents, registered trade marks, registered designs, copyright and related rights, design rights, database rights, rights in trade names, unregistered trade marks and business, company and domain names, together with applications for any of the foregoing and the right to apply for any of the foregoing, rights in know-how, 9. rights in proprietary and confidential information, rights in inventions and all other industrial and intellectual property rights

Details of all IPR including patents, registered designs, registered trade marks and domain names registered, or for which applications for registration have been made, in the name of the Company.

Details of commercially significant unregistered IPR owned by the Company including unregistered trade marks, brand names, trading names, 9.1. business names, logos, copyright works (such as software, websites, advertising materials, graphics and technical information), know how and confidential information.

9.2. Copies of:

all licences of IPR owned by the Company to third parties and of 9.2.1. third party IPR to the Company (ie both licences "in" and "out");

9.2.2. where there are no formal licences but there are informal arrangements for licensing "in" or "out" of IPR, documentation evidencing such informal arrangements

Copies of all agreements or arrangements not falling within 9.2 whereby the Company has been given rights in respect of third party IPR or has given third parties' rights in respect 9.3. of its IPR or in respect of which the Company has accepted restrictions on the use of this IPR or which otherwise relate in some way to IPR owned or used by the Company.

Copies of all contracts relating to development of the Company's website showing the Company's rights in the 9.4. IPR in that website (unless the website was developed in-house by the Company's own employees).

In respect of all the documents referred to above in questions 9.2, 9.3 and 9.4 confirm whether the agreement is in 9.5. force or at an end and whether there are any outstanding breaches of the agreement by any party.

Details of any infringements or potential infringements by third parties of any IPR owned by, or licensed to, 9.6. the Company, together with details of any circumstances of which the Company is aware which might lead to such infringements. Details of any infringements or alleged infringements of any third party IPR (including misuse of third party confidential information) by the 9.7. Company together with any circumstances of which the Company is aware which may give rise to such claims of infringement.

Details of trade mark/design clearance searches the Company has undertaken (or has had a third party undertake on its behalf) to seek to 9.8. ensure that its current products/brands and those in development, will not infringe third party IPR and, where such searches have been undertaken, the results.

Details of any objections, opposition or challenges (including as to validity or ownership) to third party IPR by the 9.9. Company or by third parties against IPR applied for, owned or held by the Company.

9.10. In respect of any current trade mark/registered design application by the Company, details of any correspondence with intellectual property (IP) offices tending to show progress with the application and issues raised by the relevant IP offices, as well as copies of any official search and examination reports.

Details of any known circumstances whereby registered IPR held by the Company may be revoked or 9.11. invalidated or whereby applications for registered IPR may not proceed to grant.

10. COMPUTER SYSTEMS

please provide a schematic description 10.1. of IT network and communication software.

Details of all computer hardware, software (including off the shelf and open source software), 10.2. communications equipment, storage media, and peripherals used by the Company.

10.3. Copies of the following:

licences of computer software to the Company, specifying any 10.3.1. software which is not standard off-the- shelf software;

hardware supply/leasing 10.3.2. contracts;

10.3.3. agreements and arrangements relating to disaster recovery (including any disaster recovery plan) (and any related business interruption insurance);

agreements and arrangements 10.3.4. relating to computer security (including virus protection);

agreements and arrangements relating to the maintenance, support or 10.3.5. updating of any hardware or software; and

any other computer services agreements, including computer bureau agreements (computer sharing 10.3.6. with third parties) or outsourcing or facilities management (third party management of group computers).

Details of any software used by the Company which is not licensed to the Company, including details as to who developed it and, unless it was 10.4. developed by the employees of the Company, copies of contracts relating thereto setting out the Company's rights therein.

Details of the extent to which any hardware or software or other IT 10.5. systems referred to above are shared with any third party.

10.6. Details of the following: any material issues with the performance or functionality of 10.6.1. the Company's software, hardware or other IT systems;

any material issues involving 10.6.2. viruses or other extraneously introduced malfunctions;

any claims by licensors of software to the Company that the Company is in breach of its 10.6.3. licence with that licensor and any circumstances of which the Company is aware in which it may be in breach of any such licence;

Confirmation that the current IT system is sufficient for the 10.6.4. Company's current and reasonably foreseeable future business needs.

Details of any expenditure to which the Company has committed itself, or any 10.7. proposed expenditure, on computer hardware, software or services e.g. upgrade or development programmes.

Details of any material interruptions to 10.8. any computer system used by the Company in the last three years.

10.9. Details of all contracts relating to the Company's website including hosting and maintenance contracts or any other contracts related to the provision of internet related services.

Details of the arrangements for taking 10.10. and storing back up copies of software and data.

Confirmation that the Company has notified the Information Commissioner under relevant data protection 10.11. legislation together with details and copies of relevant documentation. If the Company has not so notified, explain why.

Details of categories of personal data held by the Company, i.e. staff 10.12. information, customer information, supplier information, etc.

Details of any instances of which the Company is aware where the 10.13. Company has not complied with data protection legislation.

Details of any notices or claims from 10.14. the Information Commissioner to the Company.

10.15. Details of any outstanding information access requests from persons about whom the Company holds personal data.

Confirmation as to whether the Company holds a marketing database of customers/contacts details and if it 10.16. does, that the Company complies with all laws and regulations in the UK in relation to sending marketing materials using that database.

PROPERTY & ASSETS OF THE 11. COMPANY

Details of properties leased or owned and a description of what they are used for in respect of the business of 11.1. the Company together with details of other businesses/companies using the same premises

Any disputes or complaints with regard to the use of any property of or 11.2. occupied by the Company, nuisance, and/or emissions therefrom.

A list and details of all assets owned by 11.3. the Company and details of any purchase price outstanding.

12. OFFICERS AND EMPLOYEES

12.1. A list of all employees with job titles, job descriptions, hours of work, salary, notice period, position, date of commencement of employment and age. All the standard terms and conditions of employment given to each of the employees (or categories of employees) together with any proposed terms and conditions.

All consultancy or management agreements, and other agreements 12.2. with agents, sales representatives, consultants or sub-contractors.

Details of any liability to make a payment to, or any existing, pending or threatened claim by or against, any 12.3. present or former officer or employee for loss of office or employment, discrimination, health and safety or otherwise.

Details of unfair dismissal or race, sex 12.4. or age disability discrimination claims.

Details of all loans and other benefits enjoyed by any employee, former employee, officer, consultant or agent 12.5. and of all contracts, transactions and arrangements made or entered into by the Company.

Details of any share option, phantom scheme, share incentive or profit 12.6. sharing or bonus or commission arrangements for employees, with details of all outstanding entitlements. Details of former directors and employees who are bound by 12.7. restrictive covenants in favour of the Company.

Details of all disputes with any employee or employee representatives 12.8. and any matter, which might give rise to such a dispute.

Details of any offer of employment or engagement made by the Company which are still outstanding or which 12.9. have been accepted but the employment or engagement has not yet commenced.

Details of any offers, promises or agreements to any future variation in 12.10. any contract of employment of the employees.

Details of any employee who has received or has given notice, or is likely to give notice, to terminate their 12.11. employment with the Company, including details of the reasons for such notice.

12.12. Details of any person currently or previously employed by the Company who is on secondment, long-term sick, maternity or other leave or who has a right to return to work or a right to be reinstated or re-engaged by the Company or to any other compensation.

Details and copies of any consultancy agreements or other agreements for the provision of services by workers, 12.13. consultants or contractors and whether they are subject to the Commercial Agents (Council Directive) Regulations 1993.

13. PENSIONS

Details of any current or proposed 13.1. Pension Scheme (statutory or non- statutory).

List of employees in the pension 13.2. scheme.

14. TAXATION

Copy of any significant and/or contentious correspondence with HM Revenue & Customs within last six years, particularly details of any investigation which has taken place, regarding without limitation VAT, 14.1. Corporation Tax, PAYE or NI contributions; and details of (i) interest/penalties incurred in last six years and (ii) any outstanding VAT liabilities or other liabilities to interest/penalties. 15. BRIBERY ACT

Is the company currently operating under, or anticipating entering into, any contracts with any foreign government 15.1. or government-owned entity or has it otherwise been in business with a foreign government?

If so, please provide details concerning negotiation and terms of contract. Who negotiated the contract on behalf of the company? Was it a competitive bidding 15.2. situation? What steps has the company taken to ensure that no corrupt payments were made or are being made in connection with this contract?

Do any members of the company’s management or Board of Directors, or any key employees, have any special 15.3. relationship with government officials? If so, what is the nature and extent of these relationships?

Is the company currently a party to any joint ventures? If so, has due diligence 15.4. been conducted on the company’s joint venture partner?

15.5. Does the company use, or has it ever used, any third party agents in connection with its dealings with foreign government officials or governmental entities? If so, where and in what context?

If so, is there a policy requiring any due diligence to be conducted with respect to such agents? What other steps are 15.6. taken to ensure that such agents have not made / are not making any corrupt payments on behalf of the company

Does the company or anyone acting on its behalf regularly make any payments 15.7. in cash? If so, to whom, under what circumstances?

Does the company currently have a policy in place governing dealings with government officials? Does this policy 15.8. cover the provisions of gifts or anything else of value to government officials? (If so, please provide a copy of this policy).

Are there any other controls in place at the company designed to prevent 15.9. corrupt payments to government officials?

15.10. Does the company provide training to employees concerning corruption- related issues, including the propriety of offering gifts to government officials? If so, what does the training entail? Are all employees provided the same training, or is there more focussed training for “high risk” job profiles?

Is the company aware of any improper payments that have been made to government officials in the past [5] years? In the past [5] years has anyone acting on behalf of the 15.11. company received a request to make, or offered to make, any improper payment? Has the company ever been investigated for corruption-related issues?

What government issued permits or approvals does the company require in 15.12. order to conduct business in each of the jurisdictions in which it operates?

What is the process through which these permits are obtained? Does the company pay a fee in connection with these permits? If so, is there any indication that the fee is unusually 15.13. large? Is the fee ever paid in cash? Does the company use any third party agents in connection with obtaining these permits / approvals? If so, what controls are in place with regard to the agents or third parties?

15.14. Do the company’s books and records accurately and in reasonable detail reflect the disposition of the company’s assets? Does the company maintain any “off the books” accounts? If so, for what purpose are these accounts maintained?