How to prepare a requisition list?

What kind of
industry research is needed at this stage?

Every requisition list should have the following features:

➢ It should present the list of documents required in a systematic fashion, classified

as corporate, regulatory, financing, property, etc. Where no information.

➢ It should be self-explanatory, as each entry to such a requisition list shall provide

with the entire background of such a requisition and the reason behind requesting
such a document.

➢ It should ask for each document in English language and if the original document
provided to us is in vernacular then a translated copy of such a document in
English should be requested.

➢ The requisition list should be consistent in style with the questionnaire ran past
the representatives of the target company at the beginning of the due diligence
exercise.

➢ The requisition list should repeat the documents, which have already been asked
in the questionnaire, ran past the representatives of the target company but have
not been provided.

Here, we would like to discuss the ways of writing a requisition by giving a couple
of examples.

Incorrect Requisition Correct Requisition

The minutes of the board meeting
of the Company dated January 6,
2015 have a reference of an
agreement capturing the terms and
conditions of borrowing from XYZ
Mercantiles Limited, Company to
provide.
The minutes of the board meeting of the
Company dated January 6, 2015 have a
reference of an agreement capturing the
terms and conditions of borrowing from
XYZ Mercantiles Limited. Company to
provide us a copy of the corresponding
document capturing the said terms and
conditions.

Company to provide copy of Please provide us the copy of the

registration certificate under the
Transplantation of Human Organs
Act, 1994.
registration under the Transplantation of
Human Organs Rules, 1995 formulated
under the Transplantation of Human
Organs Act, 1994 required to be obtained
by a hospital for removal, storage and
transplantation of human organs for
therapeutic purposes.

1
© Addictive Learning Technology Pvt. Ltd. Any unauthorized use, circulation or reproduction shall attract suitable action
under applicable law.
Industry research required while preparing a requisition list

The industry research required at this stage should contain the following preparatory
steps:

➢ Law applicable to the proposed transaction​: Prior to the commencement of

the due diligence exercise, one should undertake a review of the relevant laws to
the nature of the business of the target company in case of a merger and
acquisitions or a private equity investment transaction. For instance, please find
below a couple of examples below explicating on the issue of requirement of
review of relevant laws.

1. Takeover Code, 2011​: The Takeover Code, 2011 aims to regulate

acquisition of shares of a listed Company / acquiring control over a listed
company. So, one needs to review the conditions required for acquisition of
shares of a listed company; and

2. Competition Act, 2002​: ​With the enactment of the Competition Act in 2002,
mergers have also come within the ambit of this legislation. In the Companies
Act, 2013, mergers are regulated between companies inter alia to protect the
interests of the secured creditors and the SEBI Act, 1992 tries to protect the
interests of the investors. Apart from protecting the interests of private
parties, these objectives are different and mutually exclusive. In the
Competition Act, 2002, the objective is much broader. It aims at protecting
the appreciable adverse effect on trade-related competition in the relevant
market in India (AAEC). Therefore, one needs to review the Competition Act,
2002 for merger of two entities merging and are well within the threshold of
seeking permission of the Competition Commission of India for such a
merger.

➢ Industry Information​: In order to obtain a better perspective regarding the

target company and its activities, it will be useful to obtain general information
regarding the industry in which the company operates. For a capital markets
transaction, the offer documents filed by the peer group companies are required
to be reviewed to be able get a fair sense of disclosures required to be made in
the draft offer document. For instance, for drafting disclosure document for an
initial public offer of a company dealing in generation of electricity by renewable
resources such as solar and wind power, the disclosures made by other
companies working in the same industry, at the time of listing of those
companies, would be useful for drafting the disclosures.

For other kind of transactions as well apart from offer documents of the peer
group companies the information about the industry in which the target company
operates can be gathered from its website, material published by rating agencies,
industry reports etc.

Industry reports

Industry reports such as that of CRISIL and other agencies which are perused by
international legal counsels to an initial public offer while preparing the industry
chapter of the draft offer document.
2
© Addictive Learning Technology Pvt. Ltd. Any unauthorized use, circulation or reproduction shall attract suitable action
under applicable law.
 Ratings agencies

Rating agencies such as Moody, Crisil, Care etc. give ratings to debt issues of the
Company which enables an investor to cross check if it is viable to invest in the
initial public offering of a company.

➢ Company Information​: One can collect and review information regarding the
target company from publicly available sources, such as annual reports, audited
financials of the previous financial years and filings made to the stock exchange,
in case of a listed entity​. ​Usually, annual reports and audited financials are
provided by the company itself, though they are also available on the MCA
website or on the stock exchange website (in case of listed companies).

3
© Addictive Learning Technology Pvt. Ltd. Any unauthorized use, circulation or reproduction shall attract suitable action
under applicable law.