Last reviewed: 8 July 2026. Due diligence is where deals slow down or fall apart - not because the business is bad, but because the paperwork is not ready. This checklist covers what investors examine across finance, tax, ROC/secretarial, GST, cap table and legal, the red flags that cause problems, and how to prepare a data room that signals good governance and keeps your round on schedule.
At a glance
The checklist by area
| Area | What investors check |
|---|---|
| Financial | Audited and management accounts, MRR/ARR, burn, runway, metric reconciliation |
| Tax | Income-tax returns, TDS compliance, advance tax, notices/demands |
| GST | Returns, ITC reconciliation, registrations, any disputes |
| Secretarial / ROC | Cap table, allotments, resolutions, registers, AOC-4/MGT-7, charges |
| Legal / IP | Founder agreements, IP assignment, key contracts, litigation, licences |
Prepare the data room early
Organise everything into a structured virtual data room with a clear index, grouped by area. A tidy data room does two things: it speeds diligence, and it signals disciplined governance - which itself builds investor confidence.
Fix the red flags before they surface
The recurring problems are unfiled or mismatched tax and GST returns, an ambiguous cap table, IP not assigned to the company, and missing founder agreements. Clean these up before you go to market - fixing them mid-diligence costs momentum exactly when you cannot afford it.
Frequently asked questions
What is investor due diligence?
It is the review an investor runs before closing a round - across finance, tax, legal, secretarial and commercial areas - to confirm the company is what it claims and to surface risks that affect valuation or deal terms.
What financial documents will investors ask for?
Audited financials, management accounts, MRR/ARR and unit economics, revenue recognition policy, burn and runway, bank statements, and a reconciliation of the metrics you pitched to your books.
What tax and TDS items are checked?
Income-tax returns and computations, TDS deduction and filing history, advance tax, any notices or demands, and GST returns and reconciliations - unfiled or mismatched returns are common red flags.
What secretarial and ROC records matter?
Incorporation documents, share allotments and cap table, board and shareholder resolutions, statutory registers, charges, and timely AOC-4/MGT-7 filings. Gaps here slow or derail deals.
Why is the cap table so important?
Investors need a clean, verifiable cap table showing every share issuance, ESOP grant, convertible instrument and vesting position. Ambiguity here directly affects their ownership and the deal.
What legal and IP items are reviewed?
Founder agreements, IP assignment to the company, key contracts, employment terms, litigation, and regulatory licences. Unassigned IP or missing founder agreements are frequent problems.
How should a startup prepare a data room?
Organise documents by area - financial, tax, secretarial, legal, HR, IP - in a structured virtual data room, with an index, so diligence moves quickly and signals good governance.
What are the most common red flags?
Unfiled or mismatched tax/GST returns, an unclear cap table, unassigned IP, missing founder agreements, related-party transactions without documentation, and metrics that do not tie to the books.
We run a pre-diligence health check across finance, tax, GST, ROC and cap table, and help build your data room.
Investor Due Diligence Data RoomVirtual CFOTalk to CA Somesh Chandak & Associates - we get startups diligence-ready before a raise.
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