Acquisition of Common Shares Documents Request for Due Diligence Template

In plain language: Identifies the buyer entity and the target company by legal name, references the LOI or term sheet that triggered the request, and defines key terms used throughout the document.

Common mistake: Using the target's trade name instead of its registered legal name. If the entity name on the request doesn't match the registered entity, document production may be delayed and later indemnification claims can be harder to enforce.

In plain language: Defines what the request covers, confirms that document production does not create any binding obligation to complete the transaction, and states that the buyer's review is subject to the confidentiality agreement already in place.

Common mistake: Omitting a reference to the executed NDA. If the scope clause doesn't tie back to a confidentiality agreement, the target may legitimately withhold sensitive documents pending separate confidentiality terms.

In plain language: Requests the target's foundational corporate documents — articles of incorporation, bylaws, minute books, board resolutions, shareholder agreements, and cap table — to verify the company exists as represented and that the shares can be validly transferred.

Common mistake: Failing to request the fully diluted cap table including all option grants, warrants, and convertible notes. Buyers who omit this discover undisclosed dilution only at closing, reducing their effective ownership percentage.

In plain language: Requests audited or reviewed financial statements for the preceding three to five fiscal years, the most recent interim financials, management accounts, and any going-concern qualifications — the foundation of purchase price justification.

Common mistake: Accepting only compiled (unreviewed) financials without requesting the auditor's management letters. Management letters often disclose internal control weaknesses, tax positions, and off-balance-sheet items that the financials themselves do not surface.

In plain language: Identifies all significant agreements — customer contracts, supplier agreements, licenses, financing arrangements, and joint ventures — that a buyer must review to assess revenue concentration, change-of-control triggers, and ongoing obligations.

Common mistake: Setting the materiality threshold too high (e.g., $500K) and missing clusters of smaller contracts that in aggregate represent significant revenue concentration or change-of-control risk.

In plain language: Requests all IP registrations, pending applications, license agreements, open-source usage disclosures, and employee IP assignment agreements — critical for technology companies where IP is the primary value driver.

Common mistake: Not requesting contractor IP assignment agreements. In many companies, key software or creative work was produced by freelancers who never signed an IP assignment — meaning the target may not own the IP it purports to sell.

In plain language: Covers all employment agreements, offer letters, severance obligations, equity plan documentation, and benefit plan summaries to surface change-of-control payments, key-employee retention risk, and post-closing compensation liabilities.

Common mistake: Overlooking equity acceleration provisions. Many startup option grants include single or double-trigger acceleration on change of control — undisclosed acceleration obligations can materially increase the effective purchase price.

In plain language: Requests all pending and threatened litigation, regulatory correspondence, environmental reports, and compliance certifications to identify contingent liabilities that could affect post-closing value.

Common mistake: Not requesting regulatory correspondence proactively — only asking for 'pending proceedings.' Regulatory inquiries that have not yet become formal proceedings can be equally material and are often omitted if the request language is too narrow.

In plain language: Covers all leases, owned real estate, equipment financing agreements, and title documents to identify liens, termination rights, or change-of-control restrictions in real property or equipment arrangements.

Common mistake: Skipping a review of equipment and software financing agreements. Many operating companies have lender security interests registered against substantially all assets that must be discharged at closing for title to pass cleanly.

In plain language: Specifies the deadline by which the target must upload documents to the data room, the platform to be used, access control requirements, and the signature blocks confirming both parties' agreement to the process.

Common mistake: Not specifying a production deadline and data-room platform in the document itself. Open-ended requests routinely result in rolling production over months, delaying closing and eroding deal certainty.

A due diligence request for a common shares acquisition is a formal document a buyer sends to a target company after signing a letter of intent, itemizing every category of corporate, financial, legal, and operational record the buyer requires before completing the share purchase. It initiates the structured review phase of the transaction, establishes a production timeline, and defines the data-room protocol the target must follow. Unlike an asset acquisition, a share purchase transfers all liabilities of the target entity — making thorough due diligence essential to identify undisclosed obligations.

Standard categories include corporate records (articles, bylaws, minute books, cap table), financial statements for three to five years, material contracts, intellectual property registrations and assignment agreements, employment agreements and equity plans, litigation and regulatory correspondence, real property leases, and environmental reports. For technology targets, the list expands to include software licenses, open-source inventories, and data-processing agreements. The exact scope is calibrated to the target's industry, size, and identified risk areas.

In a share purchase, the buyer acquires the entire legal entity — including all undisclosed liabilities, contingent claims, and historical tax obligations. In an asset purchase, the buyer selects specific assets and generally does not assume pre-existing liabilities unless explicitly agreed. This distinction makes due diligence substantially more critical in a share transaction, because the buyer inherits whatever the entity owns and owes. A due diligence request for a share acquisition must therefore cover compliance, litigation, and tax history in far greater depth than an asset deal.

For a well-organized private company with a prepared data room, initial document production typically takes 15 to 30 business days from the date of the request. Buyer review and follow-up requests add another two to six weeks. Total due diligence periods of 45 to 90 calendar days are common in mid-market transactions. Complex targets, missing records, or regulatory issues can extend the process to four to six months. The exclusivity period in the LOI should be set to cover the realistic due diligence timeline with a buffer.

A due diligence request is not itself a binding purchase obligation, but it creates enforceable obligations to produce documents if the target's agreement to the process is captured in a signed document, an LOI with a due diligence covenant, or an exclusivity agreement. The scope clause of a well-drafted request explicitly states that production does not create a transaction obligation while still establishing the agreed scope and timeline of disclosure. Consider consulting a lawyer to confirm the enforceability of production obligations in the target's jurisdiction.

If production obligations are captured in the LOI or a separate process agreement, refusal to produce a material document is typically a breach entitling the buyer to terminate and seek reimbursement of due diligence costs. Even where no formal production obligation exists, selective non-disclosure is a significant red flag that experienced buyers treat as a deal-stopper or a basis for price renegotiation. Document what was requested and what was not produced — this record is valuable in post-closing indemnification disputes.

For transactions below $500K involving simple corporate structures, a well-prepared template reviewed by a generalist lawyer is typically sufficient. For transactions above $1M, targets with complex IP or regulatory profiles, cross-border deals, or situations involving significant litigation exposure, legal counsel should draft or substantially customize the request. The cost of a missed liability in a share purchase — which transfers all historical obligations to the buyer — almost always exceeds the cost of proper legal review.

A virtual data room (VDR) is a secure, permission-controlled online repository where the target uploads due diligence documents for buyer review. Dedicated VDR platforms (Datasite, Intralinks, Ansarada) offer audit logging, watermarking, and granular access controls. For transactions above $500K, a dedicated VDR is strongly recommended — the audit log showing which documents were available to the buyer and when is critical evidence in post-closing disputes. For smaller deals, a well-organized shared folder with version control can suffice.

A change-of-control clause in a third-party contract gives the counterparty specific rights — often termination, price renegotiation, or consent requirements — when ownership of the contracting entity changes. In a share acquisition, every customer contract, supplier agreement, lease, and license must be reviewed for this provision. A single anchor-customer contract or critical software license with a change-of-control termination right can materially reduce the target's post-closing value and may require pre-closing consent as a condition of the transaction.