The Penny King's Free and Clear M&A Fund

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Due Diligence Checklist

The first three categories of items you should have before you buy any corporation or business:

CORPORATE MATTERS

Articles and Certificates of Incorporation (or Partnership Agreement, LLC Agreement or similar organizational documents), as amended, and Federal Employer Identification No.
Bylaws, as amended.
Minutes of the meetings of the governing boards (and key committees) of the Corporations for the last three (3) years.
List of all directors/trustees (or their equivalents) of the Corporations and any standing or temporary committees thereof, identifying the Chairperson.
Stock records of any for?profit corporations, and member records, partnership interests, or LLC interests, if any, of the non?stock corporations,
Conflict/duality of interest policies, all statements submitted pursuant thereto, and all known actual or potential interested transactions for the previous three (3) years.
If any Corporation has made interest?free loans or advances to members of the governing board or employees of the Corporation, provide detailed information.
If any Corporation has guaranteed any bank loans (or other loans) to members of the governing board or Corporation employees, provide detailed information.
Organization chart (management and corporate structure).
Schedule of states where the Corporations are (or should be) qualified as a foreign entity, or have offices.
Schedule of names under which the Corporations do business.

FINANCIAL MATTERS

All audited financial statements (whether consolidated or otherwise) for the Corporations for the past three (3) years, as well as any financial discussion accompanying such statements that explains variances from year?to?year or comparisons to budget, and the most recent balance sheet and income statements for the Corporations
Interim unaudited financial statements for the Corporations for the most recent period available.
Internal audit reports for current year and preceding three (3) years.
Auditors’ letters to management of the Corporations for the past three (3) years and any written responses by management.
With respect to the Material Facilities, all material correspondence sent to or received from federal or state intermediaries for the Medicare, Medicaid and CHAMPUS Programs for all unsettled years in connection with any Corporation’s participation in those programs and a statement as to which years are still open for Medicare and Medicaid reimbursement. Also, the most recently filed Medicare/Medicaid Cost Report for the Material Facilities.
Operating and capital budgets for current fiscal year for all facilities.
Feasibility studies, business plans, capital plan and other long?range plans or projections produced over the previous three (3) years for each of the Material Facilities and any for the Corporations as a whole.
Bond documents and other debt instruments, including mortgages, credit lines, lease lines (whether operating or capital) and all debt covenants and compliance.
Schedule of accounts and/or notes receivable and payable owed to or by any related entity to or by any director, officer, employee or their relatives.
Investment Policy

TAX MATTERS

Copies of returns (1120, 990 and 990T and other material forms) for last three (3) years (federal, state and local).

Copies of the Internal Revenue Service (“IRS”), state and local determination and other letters and certificates concerning tax?exempt status, private foundation status, etc.
All IRS correspondence with the Corporations, to the extent specifically requested, involving their exempt status or disputed items including, but not limited to, audit and revenue agents’ reports (federal state and local) in the last three years; settlement documents and correspondence in the last three years; agreements waiving statute of limitations or extending time; and copies of all unexpired IRS powers of attorney.
IRS audit and revenue agents’ reports, if any.
Ruling requests made and rulings received in last three (3) years other than those concerning tax?exempt status.
Copies of any contracts between a Corporation and an organization other than a Corporation that performs ancillary functions for a Corporation (e.g., laundry, cafeteria, etc.).
Schedule of any loans, leases or other transactions with individuals or others at rates below market.
Describe any organizations which do not qualify for exemption from federal income taxation either under Section 501(c)(3) of the Code or as a governmental entity which currently lease facilities from any Corporation or which will or may lease facilities financed or refinanced with proceeds of proposed bonds.