May 2021

Week Duration: 26/05/2021 to 01/06/2021

Exercises on Introduction to Due Diligence and

Requisition List
Learning objectives :

1) To understand what a due diligence report is, its contents and when it is
provided;

2) To learn how to draft and review the scope, liabilities, definition and fact sheet
for a due diligence.

3) To learn how contentious issues can be addressed in the due diligence report
and how red flags can be indicated.

Exercise 1: Exercise on drafting the scope, limitations of liabilities,

definitions, fact sheet for a due diligence.

Future Retail Limited (“Future Retail”) is an india-based company engaged in the

business of retailing a range of household and consumer products through its
various departmental store facilities under various formats. The company is primarily
engaged in the business of multi brand retail trade. Future Retail presently listed
entities such as Big Bazaar, Food Hall, Nilgiris, FBB, Central, Heritage Foods and
Brand Factory and has a network presence in and about 1,700 stores across
different formats.

Reliance Industries Limited (“RIL”) is arguably India’s largest private sector company
on all major financial parameters and first private sector company from India to
feature in the Fortune Global 500 list. Reliance Retail operates close to 11,784
stores split across various categories across India.

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RIL has approached Mr. Kishore Biyani, founder and CEO of Future Group to buy
the retail assets of Future Group to bolster its position in India’s retail segment.

As per the proposed deal structure, five listed entities including Future Retail Ltd
Future Consumer, Future Lifestyle Fashions, Future Supply Chain and Future Market
Networks, will be merged into Future Enterprises Limited (“FEL”) before the sale of
assets. FEL will then conduct a slump sale of its retail assets to one of the retail
subsidiaries of Reliance Industries.

(Source: LiveMint’s article on the deal )

Assuming your firm has been engaged by Future Retail to conduct a legal due
diligence on RIL, kindly draft the following as allocated to you during your team’s
last meeting.

1. Kindly draft a clause detailing the scope of review for the due diligence report
and limiting the liability of our firm in connection with the proposed transaction.

[Hint: You may refer to the introduction part of the sample due diligence report
available in your LMS to understand how this clause will be worded]

2. Kindly draft the definition for the following Capitalised terms to be used in the
report:

AoA, Closing, Companies Act, Condition Precedent, Cut-off Date, Data Room,
MoA, AoA, Proposed Transaction, Report, Transaction Documents.

[Hint: The definition should always be drafted keeping in mind the context in
which the above terms shall be used in a due diligence report.]

3. Kindly edit the fact sheet attached at the end of this exercise as Annexure 1 to
be added to the due diligence report. You can access the Articles of
Association (“AoA”), Memorandum of Association (“MoA”) and Certificates
here.
In case you do not have sufficient information to address all columns, kindly

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 delineate the documents you would be requiring to find that information or the
reason for conducting diligence with respect to that particular clause.

[Hint: Specific hints to each of the clauses are provided in the fact sheet itself.]

4. Kindly finish the following clauses with respect to the MoA & AoA in the due
diligence report. Also mention where you would be addressing it in the final
report.

[Hint: In this part, you would always first check if any provisions in the
MoA/AoA are inconsistent with the Companies Act, as such provisions would
be void under Section 9 of the 1956 Act & Section 6 of 2013 Act.

After this, it is necessary to examine the MOA and AOA to understand

whether the proposed transaction is permitted or any restrictions are imposed
by them]

MoA

(a) We have reviewed the MoA of the Company. The points that should be
noted are as follows:
(i) The Company is authorised under its MOA to undertake the
business activity carried on by it.
(ii) [●]

[Hint:

1. Check whether the form of the MOA is as per S 13, 14 & 15 of 1956
Act or S. 4 of 2013 Act.
2. Examine the object clause of the MoA to understand whether the
Company is permitted to carry on the business that is currently
transacting]

AoA

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 (b) We have reviewed the AoA of the Company. The points that should be
noted are as follows:
(i) [●]

[Hint:

1. Point out any restrictions/requirements that may be imposed by the

AOA with respect to transactions such as the Proposed Transaction.

2. Check if any provisions of the articles are entrenched as per Section 5

of the Companies Act, 2013. Explain the consequences in detail.

3. Mention any other details that should be looked out for while reviewing
the Articles of Association as per Companies Act, 2013]

Reference chapters from the LMS in your course:

Module 10

● How to write observations

● What are the different sections of a due diligence report?

● Presentation in a due diligence report - when and where to use tables and
graphs

● Sample due diligence report

Exercise 2: Understanding the different sections of a due diligence

report.

Continuing with the factual situation provided to you in the Exercise 1, Assuming that
you have engaged an intern to assist you in the transaction, Draft an email
explaining the following to the intern in relation to the proposed transaction between
RIL and Future Retail

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 1. What are the steps in due diligence for the proposed transaction with RIL?
Kindly explain the process till completion of the transaction and relevance of
due diligence in the entire transaction.
2. What would be the important sections of the legal due diligence report and
what are some of the most common mistakes that he/she should be careful
while carrying out the transaction.

Reference chapters from the LMS in your course:

Module 10

● How to write observations

● What are the different sections of a due diligence report?

● Presentation in a due diligence report - when and where to use tables and
graphs

● Sample due diligence report

References from the web :

https://work.chron.com/write-due-diligence-report-4061.html

https://cleartax.in/s/due-diligence

https://www.icsi.edu/media/portals/70/241120123.pdf

Annexure 1: Fact Sheet

Company name: [●]

[Hint: This would be the name mentioned in the latest Certificate of

Incorporation of the Company. Also, find out whether company
needs to get a fresh certificate of incorporation under the
Companies Act, 2013 upon any change in name]

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Registered number: [insert the corporate identity number] as is evident from the
Certificate of Incorporation issued by the ROC, [●]

Type of company: [public/private] limited company

Date and place of [insert date of incorporation] at [place of incorporation] as is

incorporation: evident from the Certificate of Incorporation issued by the ROC, [●]

Date of [insert date of the certificate of commencement of business], as is

commencement of evident from the Certificate of Commencement of business issued
business by the ROC, [●]
(for public company)
[Hint: Kindly check Section 11 of the Companies Act, 2013 to
understand the requirement of this.]

Registered office and Registered Office: [●]

principal place of Principal Place of business: [●]
business:
[Hint: : The details of the registered office can be obtained from the
latest annual returns filed by the Company under S.159 of
Companies Act, 1956 or Section 92 of Companies Act, 2013. If the
Company has changed its registered office, then check for a
certificate of registration of such change issued by ROC under
S.17/17A of Companies Act, 1956 or Sections 12/13 of Companies
Act, 2013.]

Name changes: The name of the Company was changed from [●] to [●] on [●]
(i)

Main Objects under [●]

MoA:
[Hint: Pursuant to S.13(1)(e) of the Companies Act, 1956,
companies are required to state in their MOA (i) the main objects
to be pursued by the company (ii) objects incidental or ancillary to
the attainment of the main objects; and (iii) other objects of the
company. Section 4 of Companies Act, 2013 does not make any
distinction between the objects of the Company as main, ancillary

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 or other objects but merely states that the objects of the Company
must be stated in the MOA.
If any objects have been altered, check the special resolution
passed to amend the MOA and the certificate of registration of
such alteration issued by the ROC. ]

Brief Description of [●]

Company’s Activities:

Authorised share Rs. [●] divided into:

capital under MoA: i. Equity Share Capital:
[●] Equity Shares of Rs. [●] each aggregating to Rs. [●].

ii. Preference Share capital

[●] Preference Shares of Rs. [●] each aggregating to Rs. [●].

[Hint:Check the MOA or latest annual report for this information]

Issued and paid-up Rs. [●] divided into:

share capital: i. Equity Share Capital:
[●] Equity Shares of Rs. [●] each aggregating to Rs. [●].

ii. Preference Share capital

[●] Preference Shares of Rs. [●] each aggregating to Rs. [●]..

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Directors: Article [●] of the AOA states that unless otherwise determined by a
general meeting of the Company and subject to the provisions of
Section 252 of the Companies Act, 1956 or Section 149 of the
Companies Act, 2013, the number of Directors (including
Debenture and Alternate Directors, if any) shall not be less than [●]
or more than [●].
Directors as on [●]

Name of Designation Date of Last Compensatio

Director Appointment n (per month)

[Chairman]

[Managing
Director]

[Independent
Director]

[Non-executi
ve Director]

[Woman
Director]

Committees: A. [Name of Committee]

(i) [Name of Member]
(ii) [Name of Member]
B. [Name of Committee]
(i) [Name of Member]
(ii) [Name of Member]
Please refer to paragraph [●] of this Part 4 of the Report for a list of
issues in some of the minutes of the Committee meetings.

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 Statutory Records and The Company maintains the following statutory registers:
Registers Maintained:

Accounting reference
date/financial year end:

Statutory Auditors
(including name,
address and telephone
number):

Permanent Account
Number:

Company Secretary [●]

(include name, address
and contact no.): [Hint: Companies Act, 2013 has listed out several compliances with
respect to Company Secretaries. Kindly list out the compliances
that you will need to check while conducting the due diligence]

Subsidiaries of the (i) [insert name, CIN and registered office details of the subsidiary]
Company (ii) [insert name, CIN and registered office details of the subsidiary]
Please refer to Annexure 1 for a structure chart of the Group.

Dividend Declaration:

Meeting Date Dividend %

[●]AGM

[●]AGM

[RD1]From here onwards, these details might need some background to them and might not be possible from MoA/AoA… This can be covered next week
maybe?

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