codexkit-legal-due-diligence

name	codexkit-legal-due-diligence
description	Conduct structured legal due diligence for M&A, joint ventures, or investment transactions. Cover all 9 workstreams — Corporate, Contracts, IP, Litigation, Regulatory, Employment, Tax, Environmental, and Data Privacy. Produce a risk matrix with deal-breaker flags and closing conditions. Use when evaluating a target or counterparty.
version	1.0.0
category	verification

Legal Due Diligence Analyst

When to Use

• Before signing an M&A deal, JV agreement, or investment
• When evaluating a target company's legal risk profile
• When preparing a due diligence report for the board or investment committee
• When a lender or investor requires legal DD as a condition

Procedure

Step 1 — Scope and Materiality

1. Confirm deal type: M&A (asset/share), JV, Investment, Licensing
2. Define materiality thresholds (e.g., contracts > $50K, litigation > $100K)
3. Set access parameters: full data room, limited access, or desktop review

Step 2 — 9 Workstream Review

#	Workstream	Key Questions
1	Corporate	Incorporation docs, cap table, board minutes, subsidiaries, shareholder agreements
2	Contracts	Material contracts, change of control clauses, termination provisions, exclusivity
3	IP	Patents, trademarks, copyrights, licenses, open-source exposure, trade secrets
4	Litigation	Pending/threatened claims, regulatory proceedings, arbitrations, settlements
5	Regulatory	Licenses, permits, sector-specific compliance, sanctions, export controls
6	Employment	Key person risk, employment contracts, non-competes, benefit obligations, labor disputes
7	Tax	Tax returns, assessments, transfer pricing, tax losses, withholding obligations
8	Environmental	Environmental liabilities, contamination, permits, ESG compliance
9	Data Privacy	GDPR/CCPA compliance, data processing agreements, breach history, cross-border transfers

Step 3 — Risk Assessment

For each finding, classify:

Severity	Definition	Action
🔴 Critical / Deal-breaker	Could kill the deal or require fundamental restructuring	Escalate immediately
🟠 High	Requires contractual protection (indemnity, escrow, warranty)	Negotiate in SPA
🟡 Medium	Manageable post-closing with defined plan	Monitor and plan
🟢 Low	Standard, no special action	Note for record

Step 4 — Closing Conditions

Generate conditions precedent (CPs) for any 🔴 or 🟠 finding that must be resolved before closing.

Inputs

Input	Required	Format
Deal type	Yes	M&A / JV / Investment / Licensing
Target company docs	Yes	Data room or document list
Materiality threshold	Recommended	Currency amount
Prior DD reports	Optional	If available from advisors

Output

## Legal Due Diligence Report — [Target] — [Date]

### Executive Summary

Deal type: Share acquisition (100%)
Overall risk assessment: 🟡 MEDIUM — proceed with protections
Key concerns: 2 critical IP issues, 1 pending litigation

### Risk Matrix

| # | Workstream | Finding | Severity | Recommendation |
|---|-----------|---------|----------|----------------|
| 1 | IP | Patent #3421 expires in 6 months, core to product | 🔴 Critical | Require IP warranty + escrow |
| 2 | IP | Open-source GPL dependency in core module | 🟠 High | Indemnity clause in SPA |
| 3 | Litigation | Customer lawsuit pending ($200K claim) | 🟠 High | Seller indemnity, escrow $250K |
| 4 | Employment | CTO has no non-compete agreement | 🟡 Medium | New contract as CP |
| 5 | Tax | Transfer pricing study outdated (2022) | 🟡 Medium | Update post-closing |
| 6 | Data Privacy | No DPA with 3 key processors | 🟡 Medium | Execute DPAs pre-closing |
| 7 | Corporate | All filings current, no issues | 🟢 Low | — |

### Deal-Breaker Flags

1. 🔴 Patent #3421 expiration — requires renewal confirmation or IP warranty
2. 🔴 None other — deal can proceed with identified protections

### Conditions Precedent

| # | Condition | Owner | Deadline |
|---|-----------|-------|----------|
| 1 | Patent renewal confirmation | Seller | Before signing |
| 2 | CTO employment + non-compete | Seller | Before closing |
| 3 | DPAs with 3 processors executed | Seller | Before closing |

### Recommended SPA Protections

- IP warranty and indemnity (uncapped for 3 years)
- Litigation escrow: $250K
- General warranty period: 24 months
- W&I insurance recommended

Definition of Done

• All 9 workstreams reviewed with findings documented
• Risk matrix with severity classification for each finding
• Deal-breaker flags clearly called out
• Conditions precedent generated for 🔴/🟠 findings
• SPA protection recommendations provided
• Executive summary with overall risk assessment

Examples

Prompt

We are acquiring 100% shares of TechCo Ltd.
Here is the data room summary: [paste document list]
Deal size: $5M. Materiality: $50K.
Key concern: their main product relies on a patent expiring soon.
Conduct a legal due diligence and flag deal-breakers.

Quality Criteria

• Every finding is tied to a specific evidence source (log, test, metric)
• Pass/fail criteria are binary and measurable — no subjective judgments
• Severity levels are assigned with clear thresholds
• Remediation steps are provided for all critical and high findings

Verification (4C)

Check	Question
Correctness	Are all pass/fail criteria applied against the correct standard or rule?
Completeness	Were all required dimensions or checklist items evaluated?
Context-fit	Does the verification scope match the actual risk level of the deliverable?
Consequence	If this passed verification but had a hidden flaw, what is the worst-case impact?

Edge Cases

• Incomplete data for full assessment — Document which checks were limited and flag for re-verification when data becomes available.
• Ambiguous pass/fail criteria — Request clarification from the standard owner before scoring. Mark as 'Needs Review'.
• Multiple overlapping standards — Identify the governing standard and note where others diverge.

Changelog

• v1.0.0 — Initial release