What is a due diligence checklist template?

A due diligence checklist template is essential for attorneys and legal departments involved in significant business transactions like mergers and acquisitions (M&A), vendor onboarding, or customer due diligence activities supporting anti-money laundering (AML) and know-your-customer (KYC) compliance. A checklist, timeline, or model form gives attorneys an organized and efficient document to collect, understand, and assess all relevant information received during simple or complex legal processes.

What due diligence resources are available?

Numerous due diligence resources are available to help attorneys and legal teams plan and execute tasks at both state and national levels. These documents help eliminate unnecessary delays, providing better client service and more effective legal guidance.

• Checklists. These map out processes for attorneys, detailing every step of a legal process, ranging from simple corporate maintenance issues to major acquisitions of products or businesses.
• Model forms. These templates help make routine legal tasks easier and more efficient. They may include stock purchase agreements, merger and asset purchase forms, LLC and stockholder agreements, and other organizational documents.
• Practice notes and legal updates. These help guide attorneys and keep them current on general corporate law topics like public and private mergers, stock and asset acquisitions, and relevant case law.

Access to legal insiders and subject matter experts is also critical. Tapping into reference attorneys' collective knowledge and experience allows for greater insights and an ability to solve problems before they present themselves.

How does a due diligence compliance checklist help?

A due diligence checklist template makes any legal process smoother — from simple to complex — and will decrease the workload of legal teams and others involved in the process. By mitigating risks during and after each task, a due diligence compliance checklist helps attorneys:

See the big picture, understanding what is at stake

A template takes the guesswork out of complex tasks, streamlining and optimizing the process.

Identify, organize, and complete any interviews or documents

Whether it's an M&A, vendor onboarding, or due diligence process, the legal team will need to develop a list of organizational files, intellectual property, contracts, and employee benefits materials.

Maintain thorough documentation throughout the process

The checklist helps legal teams ensure all necessary documentation, such as contracts, agreements, licenses, and permits, are obtained and properly filed for audit purposes and future reference.

A checklist or template allows the team to review its work, identify areas that require more information or investigation, and safeguard against missing any essential information.

When can I use a due diligence checklist template?

Due to regulatory reforms and increased informational needs, legal due diligence frequently requires advanced investigative tools and technologies. A checklist, template, or flowchart is useful when an attorney wants to control a legal process or workflow. Below are some examples.

Mergers and acquisitions

Gathering information on employee plans — such as health insurance, disability, severance plans, retirement plans, or stock purchase or incentive plans — is especially important during a merger-and-acquisition process. The purchasing corporation needs to know what plans the target corporation offers its employees.

Additionally, general corporate matters like charter documents, board members, security holders, and the minutes of stockholder and board of director meetings are necessary to the acquisition process. This process is often time consuming; however, a template or checklist helps streamline the information, ensuring legal teams stay on track and investigate only the necessary information.

Finally, a due diligence checklist or template can help a target company gain additional competitor intelligence. The buyer will have access to the target company's current and anticipated competitors, which might be new data. This information allows the buyer to immediately determine the advantages and disadvantages of the company's products and technologies.

Explore our M&A due diligence guide to jumpstart your investigation for public or private buyouts.

Vendor onboarding

A due diligence compliance checklist plays a crucial role in the vendor onboarding process. It ensures that potential vendors meet certain standards, regulations, and requirements before partnership or engagement approval.

The checklist helps identify potential risks associated with a vendor, such as legal, financial, operational, or reputational risks. By systematically evaluating various aspects of the vendor's business, the checklist helps teams uncover potential risks early in the process. It also helps ensure that the vendor complies with all relevant regulations, certifications, and standards, mitigating the risk of non-compliance issues.

Assessing a vendor's financial stability is critical to ensuring they can fulfill their obligations and deliver on their promises. The checklist typically includes reviewing statements, credit reports, and other indicators to gauge the vendor's financial health. The checklist helps evaluate factors such as production capacity, technology infrastructure, and workforce capabilities.

Customer due diligence

A compliance checklist is valuable for conducting customer due diligence, especially in industries such as banking, finance, real estate, and others where regulatory requirements for customer onboarding are stringent. As with vendor onboarding, a checklist helps identify and assess various risks associated with potential customers. These risks can include financial, legal, reputational, or regulatory risks.

Customer due diligence is often subject to regulatory requirements aimed at preventing money laundering, terrorist financing, fraud, and other financial crimes. The checklist helps ensure that all necessary regulatory requirements — like know-your-customer (KYC) and Anti-Money Laundering (AML) regulations — are followed during the onboarding process.

Verifying customers' identities is a crucial step in customer due diligence. The checklist includes procedures for verifying customer identities using documents such as government-issued IDs, passports, utility bills, government sanction lists, and other relevant documents.

Sample due diligence checklist template

This due diligence checklist template can provide a framework for your investigations — and ensure you cover all the bases, including:

• Assets and liabilities
• Company
• Company biography
• Legal
• Media

Conducting thorough business due diligence requires attention to detail, a well-thought-out game plan, and persistence to ensure that nothing falls through the cracks.