Startup Due Diligence Checklist: The 40 Documents Investors Ask For Before Wiring Money

Term sheet signed, money not yet in — this is the stage where Indian startups lose weeks and sometimes the round itself. The investor's lawyers and accountants now test whether the company's documents match the story. Most findings are not fraud; they are gaps nobody fixed because nobody asked. The checklist below is the one we see requested in seed and Series A diligence for Private Limited companies, grouped the way the advisers group it, with what each item is really testing.

1. Corporate and secretarial

2. Financial

• Audited financial statements for all completed years and the auditor's report with CARO where applicable.
• Monthly management accounts for the last 24 months: P&L, balance sheet, cash flow, with bank reconciliations.
• Revenue schedule by customer and month, with contracts for the top ten; deferred-revenue workings for subscriptions.
• Debtors and creditors ageing; related-party transactions with approvals.
• Loans: director loans, bank facilities, sanction letters, security created and CHG-1 filings.
• Fixed-asset register and capitalised development costs with the policy applied.
• Budget versus actual and the model behind the pitch — advisers rebuild it.

The single most common financial finding is revenue in the pitch that is bookings or GMV in the books. Define the metric once and use it everywhere.

3. Tax

• Income-tax returns, computation and 143(1) intimations for all years; any notice under 142(1), 143(2), 148 and its status.
• GST registrations in each state, GSTR-1, GSTR-3B and GSTR-9 for all periods, and a reconciliation of GSTR-3B turnover with the books and with the income-tax return.
• GSTR-2B versus ITC claimed; blocked credits reversed; RCM paid on imports of services (foreign SaaS, contractors abroad).
• TDS returns 24Q and 26Q, Form 16 and 16A issued, 26AS matched; TDS on foreign payments with Form 15CA/CB.
• Professional tax, PF and ESI registrations and challans once thresholds crossed.
• Angel-tax position for each round: DPIIT declaration or valuation support.

4. Legal and contracts

• Founders' agreement with vesting, roles and IP assignment; employment agreements for all staff with confidentiality and IP clauses; contractor agreements with IP assignment.
• Customer and vendor contracts; any with change-of-control, exclusivity or most-favoured-customer clauses flagged.
• Trademark applications and registrations in the company's name; domain ownership; software licences.
• Litigation, notices, show-cause and demand letters, with counsel's view.
• Lease or licence for the registered office and any other premises; NOCs.
• Regulatory licences specific to the sector: FSSAI, drug licence, NBFC or payment-aggregator approvals, IEC, SEBI registration where relevant.

5. People and data

• Headcount and cost by function, offer letters, appointment letters compliant with the Labour Codes, POSH policy and internal committee where ten or more employees.
• ESOP scheme, grants, vesting status and the shareholder approval for the pool.
• Privacy policy and consent mechanics under the DPDP Act and the 2025 Rules; where personal data is stored; vendor data-processing terms; breach-response plan.
• Information-security basics: access control, backups, who holds admin credentials for banking, cloud and domain.

How to run the process

1. Build the data room before you need it — a numbered folder per section above, documents named by date and form number.
2. Run your own diligence first. A Virtual CFO engagement typically does exactly this: monthly close, GST and TDS reconciliation, a secretarial health check and a standing data room, so the company is always "raise-ready" rather than scrambling after a term sheet.
3. Fix what can be fixed: late filings with additional fees, missing minutes ratified, IP assignments executed now, GST reconciliations with reasons for differences.
4. Disclose what cannot be fixed in a disclosure letter against the warranties. Investors price known problems; they walk away from discovered ones.

Common mistakes

• Assembling the data room after the term sheet. Every week of delay is leverage lost; some term sheets lapse.
• Different revenue numbers in the pitch, the MIS and the GST returns. Reconcile and explain before anyone else notices.
• IP owned by a founder or a freelancer. Execute assignment deeds with consideration before diligence starts.
• Unfiled INC-20A or missing PAS-3. Cheap to cure, fatal to ignore.
• No DPDP posture at all. For consumer startups this has become a standard Series A finding.
• Hiding a notice. A disclosed 143(1) demand of ₹40,000 is a footnote; an undisclosed one is a trust problem.

General information on diligence practice, not legal advice; the warranties and disclosures in your transaction documents should be settled with your own advocate.

Frequently asked questions

How long does startup due diligence take in India?

With a ready data room and clean filings, two to three weeks for a seed round and four to six weeks for a Series A. If the company has to reconstruct management accounts, reconcile GST or cure secretarial gaps, two months or more is common, and some term sheets lapse in that time.

What are the most common red flags found in diligence?

Unfiled INC-20A, share allotments without PAS-3 or valuation reports, GST turnover that does not match the books or the income-tax return, intellectual property held by a founder or contractor rather than the company, foreign investment without FC-GPR, and revenue in the pitch that is really bookings or gross merchandise value.

Do seed investors really check GST and TDS?

Yes. Tax compliance is the cheapest objective test of how a company is run. Advisers reconcile GSTR-3B turnover with the P&L, check ITC against GSTR-2B, and look at TDS returns and 26AS. Unexplained differences become conditions precedent or price adjustments.

What is a disclosure letter?

A schedule to the share subscription agreement in which the company lists known exceptions to the warranties it gives — a pending notice, a late filing, a disputed invoice. Properly disclosed items cannot later be claimed as breaches, so full disclosure protects founders.

General information for FY 2026-27, not professional advice for your specific case. Rules change — verify against the latest notification or ask a KyaTax expert.
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