Being Investment-Ready: The Due Diligence Checklist VCs Actually Run

Corporate records: the skeleton

Diligence begins with the company itself. Certificate of incorporation, memorandum and articles as currently amended, statutory registers, members, directors, charges, share transfers, minutes of board and general meetings, and the trail of ROC filings: annual returns, financial statements, event based forms like MGT-14 and PAS-3. The classic failures: minutes that stop eighteen months ago, registers never written up at all, resolutions passed on WhatsApp that exist nowhere in writing, and articles that were never amended to reflect the last investment round, an issue serious enough that we wrote a whole piece on why your SHA is worthless if it is not in your articles. The fix is dull and effective: a secretarial cleanup engagement, minutes reconstructed and ratified where lawful, registers written up, missed filings made with late fees. Cheap now, expensive under exclusivity time pressure.

The cap table: the single most examined page

Every share ever issued must have a paper trail: allotment resolutions, valuation reports where required, filed PAS-3s, stamped share certificates, and, for transfers, executed transfer forms. Options must trace to a properly approved scheme with grant letters and a current SH-6 register, the process we detail in our ESOP implementation guide. Convertible instruments must have their conversion mechanics documented and modelled. The classic failures: the friend who paid money in 2021 and appears in the pitch deck but not the register of members; ESOP promises in offer letters that exceed the approved pool; iSAFE notes whose stacked caps nobody has modelled; and shares issued to foreign persons without FEMA reporting. Every one of these becomes a condition precedent at best, a repriced deal at worst. Reconcile the legal cap table against the spreadsheet cap table quarterly; the day they diverge is the day the problem is cheapest.

Intellectual property: do you own the product?

For a technology company this chapter decides the deal. Investors want assignments, signed, written, from everyone who created the IP: founders, who often built the core before the company existed, employees, whose contracts need express assignment clauses because Indian copyright law does not hand employers everything by default in all situations, and, most missed of all, freelancers and agencies, who own their work absent written assignment. Add trademark registrations for the brand, domain ownership in the company’s name rather than a founder’s personal account, and licences for any open source or third party components the product depends on. The classic failure is the ghost co-founder: the college friend who wrote the first codebase, left before incorporation, signed nothing, and now owns copyright in the foundation of a company raising at forty crores. Finding and papering that person is an awkward conversation that gets more expensive with every round of appreciation. Run the IP census now, chase the signatures now.

Material contracts and consents

Diligence reads your revenue: top customer contracts, vendor and channel agreements, leases, loan documents, and every founder or related party arrangement. Lawyers hunt for specific species: change of control clauses that let a key customer terminate because of the investment itself, exclusivity or non compete grants that quietly fence the business in, unlimited liability accepted in enterprise contracts, a topic our vendor contract redlining pillar treats in depth, and assignments of receivables or IP buried in loan documents. The fix is a contracts register: one sheet listing every material contract, parties, term, renewal date, liability cap, change of control flag. Building it takes a week; carrying it into every negotiation, forever, is free.

Compliance, tax, and people

The remaining chapters move fast when clean. Tax: returns filed, GST reconciled, TDS deposited, no unexplained notices. Labour: employment contracts, PF and ESI registrations and deposits, gratuity provisioning, POSH committee constituted if you cross the ten employee threshold, state shops and establishments registration. Sector permissions where relevant: FSSAI, RBI adjacent registrations, and increasingly, data protection readiness under the DPDPA, which sophisticated investors have begun probing since the DPDP Rules 2025 started the compliance clock, an area our DPDPA compliance checklist covers in full. Disputes: pending litigation, arbitration, and regulatory notices, disclosed with a memo on exposure, because a disclosed dispute is a risk investors price, while a discovered one is a trust breach they walk from.

How to run this on yourself, this quarter

Convert the checklist into a standing data room: a cloud folder tree mirroring the chapters above, populated as documents are born rather than excavated before rounds. Assign one owner, run a quarterly gap review, and grade yourself harshly: every document either exists, signed and filed, or it is a task with a date. Founders who do this describe the same experience: the round that finally arrives feels anticlimactic, diligence takes two weeks, the questions list is short, and the terms never move against them, because nothing was found. That anticlimax is the return on investment.

Can AI help with diligence readiness?

This is one of AI’s best legal use cases, on both sides of the table, which is exactly why founders should use it first. AI tools can sweep a data room and flag unsigned documents, missing counterparts, and expired terms; extract liability caps, change of control, and exclusivity clauses from a hundred contracts into one table; reconcile the cap table spreadsheet against allotment filings; and draft the disclosure schedules that accompany warranties. Investors’ counsel already run such tools, so pre diligencing yourself with the same class of technology removes their information advantage. The limits deserve respect: AI misses what is absent, it cannot know a contract was never signed unless told what should exist, it cannot judge whether a discovered defect is fatal or trivially curable, and remediation, ratifications, condonations, renegotiations, is legal work with consequences. Use AI to find the gaps; use a qualified human to close them and to certify what an investor can rely on.

When to Review This

• Due diligence is not an exam; it is an audit of habits. The checklist is stable, corporate records, cap table paper, IP assignments, contracts, compliance, disputes, and so are the classic failures, all of which are cheaper to fix in any quarter before the round than in the month during it. Build the standing data room, run the quarterly gap review, chase the ghost signatures now, and the diligence chapter of your next round becomes what the best ones always are: short, boring, and entirely on your terms.