---

name: prompt-pack-due-diligence-report
description: Use when preparing or summarizing a legal due diligence report on a target company in connection with an M&A transaction. Covers corporate structure, material contracts, regulatory compliance, litigation exposure, IP, real estate, employment, and IT/data. Identifies material risks, assigns risk ratings, and recommends deal protections. Relevant for transactions across MENA (UAE, KSA, DIFC, ADGM, LB, EG), UK, EU, and GCC. Trigger when buy-side counsel needs to consolidate findings from document review into a formal report for the client.
license: MIT
metadata:
id: prompt-pack.due-diligence-report
category: prompt-pack
practice_area: corporate-m-a
jurisdictions: [UAE, DIFC, ADGM, KSA, LB, EG, UK, EU, GCC]
priority: P2
intent: [summarize, due-diligence-report, m-and-a, risk-assessment, acquisition]
related:
- prompt-pack-due-diligence-request-list
- prompt-pack-disclosure-letter
- prompt-pack-escrow-agreement
- prompt-pack-investment-agreement-venture-capital
source: Louis — HAQQ Legal AI (github.com/sboghossian/mini-claude-for-legal)
version: "1.0"

Due Diligence Report

When to use this

Use this skill when preparing the formal legal due diligence (LDD) report that summarizes findings from review of the target company's documents and advises the buyer on risks, required deal protections, and deal-breakers. The LDD report is the primary deliverable from buy-side legal counsel in any M&A transaction.

Typical triggers:

• Buy-side counsel has completed document review from the VDR and needs to summarize findings
• Client needs an executive summary of legal risks before signing an SPA
• Buyer is evaluating a bid and needs a preliminary red-flag report
• Post-signing, buyer needs a comprehensive LDD report to support indemnity and escrow negotiations

Required inputs

Input	Why it matters	Default if omitted
Target company name and jurisdiction	Identity; determines applicable law and regulatory regime	Ask
Buying client name	Addressee of the report; framing of recommendations	Ask
Transaction type (share purchase / asset purchase / merger)	Affects which liabilities transfer to buyer	Ask
Documents reviewed	The basis for findings; should be listed	Ask; include VDR index if available
Key risk areas flagged during review	The substance of the report	Ask in detail
Governing law of transaction	Determines deal protections available	Ask

Optional inputs

• Industry / sector (affects regulatory and compliance sections)
• Deal timeline and urgency (affects depth of preliminary vs. full report)
• Price / valuation context (affects materiality thresholds)
• Identified deal-breakers or absolute red flags
• Seller's disclosure letter (to cross-reference against)

Document structure

Executive Summary

• Transaction overview (target, buyer, deal type, indicative price)
• Overall risk assessment: Green / Amber / Red
• Top 3-5 material risks in plain language
• Recommended deal protections (price chip, escrow, specific indemnities, conditions precedent)
• Any deal-breakers that require resolution before signing

1. Corporate Structure and Good Standing

• Target's entity type, jurisdiction, and registration number
• Ownership structure: shareholder register, ultimate beneficial owners
• Corporate approvals required for the transaction
• Subsidiaries and group structure
• Foreign ownership restrictions (critical in MENA — see jurisdictional notes)
• Any ownership or control issues: pledges on shares, pre-emption rights, drag-along/tag-along rights

Risk indicators: Nominee structures, unresolved share transfers, dormant subsidiaries with unknown liabilities.

2. Material Contracts

• Review of top contracts by value or strategic importance
• Change-of-control clauses requiring third-party consent
• Assignment restrictions
• Unusual termination rights triggered by the transaction
• Key customer and supplier concentration risk

Risk indicators: Single-customer dependency; contracts terminable on change of control without consent obligations.

3. Intellectual Property

• Registered IP (trademarks, patents, domain names): ownership confirmed in target's name
• Software: licensed or owned; open-source compliance
• Employee IP assignment agreements: all creators have assigned IP to target?
• IP infringement claims or third-party challenges

Risk indicators: Key IP registered in founder's personal name; missing assignment agreements; open-source code in commercial products without compliance.

4. Regulatory and Licensing

• All material licenses and permits held by target
• Sector-specific regulatory requirements (financial services, healthcare, education, food, telecoms)
• Foreign direct investment approvals required for the acquisition
• Anti-trust / competition filings required

Risk indicators: Expired or missing licenses; regulatory investigations; FDI approval required from government authority.

5. Litigation and Disputes

• Active litigation, arbitration, regulatory proceedings
• Threatened claims; outstanding demand letters
• Judgment enforcement history

Risk indicators: Pending claims exceeding X% of deal price; unresolved regulatory enforcement actions; criminal investigations.

6. Employment and HR

• Total headcount; senior management key-person risk
• Employment contracts: fixed-term vs. indefinite; unusual terms
• Pending employment claims and tribunal proceedings
• Employee benefits and accrued obligations (gratuity, pension, NSSF)
• Non-compete / non-solicitation enforceability

Risk indicators: Unfunded end-of-service gratuity obligations; pending discrimination or wage claims; key executives without retention arrangements.

7. Real Estate and Physical Assets

• Owned and leased properties: title confirmed?
• Lease terms: change-of-control clauses, renewal rights, rent review
• Planning or building violations

Risk indicators: Missing title deeds; defective title; leases terminable on change of control.

8. Tax

• Tax filings and payment status; open assessments
• Transfer pricing; related-party transactions at arm's length?
• Withholding tax obligations on dividends, intercompany payments
• Tax losses and deferred tax positions

Risk indicators: Underpaid tax; active audit; transfer pricing risks; non-arm's-length related-party transactions.

9. IT / Data Protection

• Data protection compliance: applicable law (GDPR, UAE PDPL, KSA PDPL, etc.)
• Data breaches or regulatory investigations
• IT infrastructure: outsourced vs. in-house; key vendor dependencies

Risk indicators: Notifiable data breaches not yet addressed; non-compliant data retention practices; material IT systems under terminating third-party contracts.

10. Risk Summary Table

Risk	Description	Severity	Recommended Mitigation
[Risk A]	[Brief description]	High / Medium / Low	[Specific deal protection]

11. Recommended Deal Protections

• Specific indemnities (identified known liabilities the seller should indemnify)
• Price adjustment mechanisms (locked box, completion accounts)
• Escrow arrangement (percentage of purchase price; term)
• Conditions precedent (regulatory approvals, third-party consents)
• Material adverse change (MAC) clause triggers
• Warranty and indemnity (W&I) insurance recommendation

Jurisdictional notes

MENA — Key Structural Considerations

Jurisdiction	Foreign ownership	Mandatory approvals	End-of-service gratuity
UAE	UAE Companies Law limits foreign ownership in many onshore sectors; recent reforms allow 100% foreign ownership in most non-strategic sectors; strategic sectors require local partner	No general FDI screening authority; sector-specific approvals (Central Bank, Telecom, Energy)	Mandatory under UAE Labour Law; fully funded — acquirer assumes obligation; quantify in due diligence
KSA	SAGIA/MISA licenses required for foreign investors; restricted activity list	MISA investment license; Competition Authority merger review if thresholds met	Mandatory end-of-service award under Labour Law; calculate based on years of service
Lebanon	Foreign ownership of real estate restricted (Law 296/2001); financial institutions require BdL approval; general commercial entities less restricted	BdL approval for financial institutions; no general FDI screening	NSSF contributions and severance indemnity; significant underfunded obligations common in distressed deals
Egypt	Investment Law provides protections; real estate and media restrictions	Competition Authority approval if thresholds met; Central Bank for financial institutions	NSSF and statutory compensation; often underfunded in SME targets
DIFC / ADGM	100% foreign ownership; no restrictions	DFSA / FSRA approval for regulated activities	DIFC Employment Law — DEWS scheme (defined contribution); quantify transferred obligations

Common mistakes

• Materiality threshold miscalibration: Setting thresholds too high causes material risks to be buried; too low drowns the report in noise. Calibrate to deal size.
• No deal protection recommendations: A report that identifies risks without recommending specific deal protections (escrow, specific indemnity, conditions precedent) has failed its purpose.
• Ignoring gratuity and NSSF underfunding: In MENA deals, accrued but unfunded end-of-service gratuity obligations are routinely underestimated; they can represent a material deal adjustment.
• Missing change-of-control clauses: A material contract that terminates automatically on change of control is a deal-breaker; every material contract must be reviewed for this.
• Not flagging FDI approval requirements: Failure to identify required government approvals as a condition precedent can cause deals to close unlawfully or require reversal.

Related skills

• [[prompt-pack-due-diligence-request-list]]
• [[prompt-pack-disclosure-letter]]
• [[prompt-pack-escrow-agreement]]
• [[prompt-pack-investment-agreement-venture-capital]]