Gainesville Startup Attorneys & Lawyers

What Is a Due Diligence Checklist?

A due diligence checklist is an organized way to analyze a company that you are acquiring through sale, merger, or another method. By following this checklist, you can learn about a company's assets, liabilities, contracts, benefits, and potential problems. Due diligence checklists are usually arranged in a basic format. However, they can be changed to fit different industries.

A due diligence checklist is also used for:

• Preparing an audited financial statement or annual report
• A public or private financing transaction
• Major bank financing
• A joint venture
• An initial public offering (IPO)
• General risk management

Why Is a Due Diligence Checklist Important?

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Fully Diluted: What Is It?

Fully diluted shares are the total number of outstanding shares there would be if all convertible securities were converted to common stock. Fully diluted is one way of measuring how many shares a company has. It helps investors determine the value of the company. Common stock are the shares held by employees, managers, and shareholders who have voting rights in a company.

Fully diluted shares take many things into account. Preferred stock, for instance, is held by individuals who receive their dividends before everyone else. These people do not, however, have voting rights. However, if they have convertible preferred stock, they can turn it into com

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Preferred Equity: What is it?

Preferred equity is a general term used to describe any class of securities (stock, limited liability units, limited partnership interests) that has higher priority for distributions of a company’s cash flow or profits than common equity. Typically, all cash flow/profits remaining after required payments to a company's lenders are distributed to the preferred equity investors until they receive the full amount of a previously agreed upon return, commonly stated as a fixed percentage annual rate.

Prefe

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What is a Stock Ledger?

The stock ledger is a record that keeps track of the stock transactions for your corporation. This is only one part of the total amount of corporate records you must keep, and should be maintained in the corporate records book. All transactions regarding the shares of your business must be recorded in the stock ledger, including when shares were initially issued and any stock transfers that occur. The stock ledger should also include any shares which are surrendered or lost.

What is Written in a Stock Ledger?

For every stock transaction, the information necessary to complete the stock ledger correctly will include:

• Name of the shareholder;

• Complete mailing address of the stock shareholder including contact number;

• Stock certificate number;

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What Are Co-sale Rights?

Co-sale rights, also known as tag-along or (less often) take-me-along rights, are the rights of minority shareholders to join in when the majority shareholder or the founders sell their stock. Therefore, if the company's original owner sells his or her stock to a corporation for $20 per share, every investor with a co-sale right can get the same deal.

Co-sale rights are usually paired with the right of first refusal, or ROFR. With an ROFR clause, a company or its shareholders can buy the majority shareholder's stock if he or she decides to sell to a third party. This lets the current investors keep control of the company in case they don't like the third-party investor.

For example, say a company called Unlimited Clocks ha

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