We have operated as a loose partnership with casual board minutes and handshake agreements for fifteen years. What corporate governance cleanup must we do on our three year exit runway to survive institutional buyer legal due diligence?

Question

Tyler Smith · Accepted Answer

Informal governance is a major red flag for institutional buyers. During legal due diligence, a buyer's legal team will review every corporate record, contract, and board decision. If they find sloppy documentation, missing signatures, or verbal agreements, they will either slash your valuation or walk away from the deal entirely.

Your three year runway is the time to professionalize your corporate hygiene. Begin by conducting a thorough audit of your corporate records. Ensure you have signed operating agreements, complete board minutes for every major decision, and up to date stock ledgers. If you have handshake agreements with partners, vendors, or key employees, formalize them into written contracts immediately.

Next, review your intellectual property. Ensure all trademarks, domain names, patents, and software code are legally owned by the business entity and not by you personally or by individual developers. Every employee and contractor should have signed intellectual property assignment agreements on file.

Finally, bring structure to your board. If your board meetings have historically been casual chats over lunch, start running formal, structured board meetings. Document your strategic decisions and financial approvals. This corporate discipline shows buyers that your business is run like a professional enterprise, which significantly reduces their perceived legal and operational risk.