# Investor Due Diligence Support

> Once a term sheet is signed, the investor's lawyers and accountants review the startup's finances, tax position, company-law filings, FEMA compliance, contracts, IP and employment records. Issues they find become conditions, indemnities or a lower valuation. We manage the process for the founders: answering queries, fixing red flags fast and documenting exceptions in the disclosure letter.

Practice: Startup Funding, ESOP & Valuation — https://www.industax.com/services/startup-funding/

Common findings are predictable — allotments without PAS-3, private placements without proper offer letters, TDS defaults, GST mismatches, missing FC-GPRs, founders' or freelancers' IP never assigned, and legacy angel-tax exposure for older rounds. Most can be regularised before closing if found early.

We act as the single point of contact for diligence queries, so the founders can keep running the business while the data room questions are answered accurately and consistently.

## Key facts

| Item | Detail |
| --- | --- |
| Areas checked | Financial, tax, secretarial, FEMA, legal, IP, HR |
| Typical timeline | 3–6 weeks after term sheet |
| Outcomes | Conditions precedent, indemnities, specific disclosures |
| Fixes | Late filings, condonation, compounding, IP assignments |

## Who needs this

- Startups with a signed term sheet
- Companies selling a stake to a strategic investor
- Founders who found red flags in a mock review

## What's included

- Query management and data room responses
- Red-flag rectification
- Disclosure letter inputs
- Conditions-precedent tracking

## Documents

- Due diligence request list
- Statutory registers and filings
- Tax returns and assessments
- Material contracts

## Process

1. **Prepare** — Data room aligned to the request list.
2. **Respond** — Queries answered and red flags fixed.
3. **Close** — CPs completed and disclosures finalised.

## Also covers

- **Investor due diligence** — Financial, tax and secretarial due diligence on the company side.

## FAQs

### Can due diligence kill a deal?

Rarely by itself, but undisclosed issues damage trust; it's better to disclose and fix than to be found out.

### What is a disclosure letter?

A document listing exceptions to the warranties in the investment agreement, which limits the founders' liability for disclosed matters.

### Do we need to fix every issue before closing?

No — some are handled as conditions subsequent or specific indemnities, as agreed with the investor.

## Official sources

- Ministry of Corporate Affairs — MCA21: https://www.mca.gov.in/
- Income Tax e-Filing portal: https://www.incometax.gov.in/

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Canonical page: https://www.industax.com/services/startup-funding/investor-due-diligence-readiness
Publisher: Indus Tax — CA-led tax and compliance firm (https://www.industax.com). Contact: info@industax.com, 9059139258.
This is general information, not advice for your specific facts.