Due Diligence Services: Financial, Legal & Tax
Our due diligence services check a company before you invest in it, buy it or lend to it. We test the books, the tax position and the legal and ROC record, and give you a report that says what is wrong, what it could cost and how to cover it in the deal.
What it is
Due diligence is a structured check of a business before money changes hands. The seller tells you how the business is doing. Due diligence tests that claim against the books, the returns and the public record.
No law makes due diligence compulsory for a private deal. You do it to protect yourself. Once the money is paid, most problems become your problems, so the time to find them is before you sign.
We work from three sources: the company’s own records (ledgers, bank statements, contracts, statutory registers); the public record on the MCA V3 portal, including master data, filings and the index of charges; and returns and notices on the GST portal and the Income Tax e-filing portal. Where a formal title or legal opinion is needed, it is signed by a practising advocate; we prepare the review and coordinate with them.
Who it applies to
You are investing in a private company
Angel investors, family offices and funds. Before you subscribe to shares, you want proof that the numbers in the pitch are real.
You are buying a company or a business
Buy the shares and you inherit the company’s past. Tax demands, unfiled returns and old disputes all come with it.
You are preparing to sell or raise money
A vendor due diligence finds the gaps first. You fix them on your own time, before a buyer uses them to cut the price.
Why it matters
Price on real numbers
Valuations rest on earnings and net assets. One-off income or receivables that will never be collected make the price wrong. We adjust for that, and the adjusted numbers feed into the share valuation report.
Find the hidden liabilities
Tax demands, unpaid statutory dues, guarantees given for others, charges missing from the accounts. After closing, each of these is a cost the company, and so the new owner, carries. Take a Faridabad engineering company whose input tax credit looks clean in its own books, while some suppliers never filed their returns. That credit can be reversed with interest, and the bill arrives after you have paid for the shares.
Write a better agreement
Every red flag becomes a clause: a warranty, an indemnity, a condition to fix before closing, or money held back. Your lawyer drafts the shareholders’ agreement knowing exactly what to protect against.
What we check
| Area | What we look at | Typical red flags |
|---|---|---|
| Financial | Quality of earnings, revenue recognition, working capital, debt and debt-like items, related-party transactions | Sales booked early, old receivables, loans from directors shown as trade creditors |
| GST | GSTR-1 against GSTR-3B, input tax credit against GSTR-2B, annual returns, notices on the GST portal | ITC claimed without matching supplier filings, open demand orders |
| Income tax | Returns, tax audit reports, TDS compliance, outstanding demands and pending proceedings on the Income Tax e-filing portal | Unexplained cash credits, TDS short-deducted, share premium questioned for years before FY 2024-25 |
| Company law | Allotments, transfers, charges, loans and investments, related-party approvals, annual filings on the MCA V3 portal | Shares allotted without proper process, unfiled AOC-4 or MGT-7, charges not satisfied |
| Legal | Key customer and supplier contracts, leases, licences, IP ownership, litigation | Change-of-control clauses, unstamped agreements, trademarks in a promoter’s personal name |
Documents required
Financial
- Audited financial statements for the last three years
- Current-year trial balance and ledgers
- Bank statements and loan sanction letters
- Ageing of receivables and payables
- Fixed asset register
Tax
- Income tax returns and tax audit reports
- TDS returns and challans
- GST returns, annual returns and reconciliation statements
- All tax notices and orders, with replies
Legal and secretarial
- MoA, AoA and incorporation documents
- Statutory registers and board and general meeting minutes
- Share allotment and transfer records
- Material contracts, leases and licences
- Details of any court or tribunal case
How it works
Agree what the review must answer
We start with the deal and with what worries you about it. Then we fix which areas to cover, how many years to look back and what materiality limit to use.
Send a request list and open a data room
The target company uploads documents to a shared folder, and we chase what is missing.
Test the records against public data
We match the books with the GST portal, the Income Tax e-filing portal and the MCA V3 portal. A gap between what the company says and what the government sees is a question we must get answered.
Question the promoters and finance team
We put our questions to them and record the answers, with any documents they add.
Rank the red flags in one report
You get a report ranked by impact: the issue, the likely cost, and what to ask for in the agreement. We then walk you and your lawyer through it.
How long it takes
Plan around the data room
In practice, timing depends on how fast documents arrive. We agree a timeline in the engagement letter before we start.
Use the report before you sign
The report helps only while terms can still change, so ask for it before the agreement is signed.
File on time after closing
New shares under private placement need PAS-3 within 15 days of allotment. Foreign investment needs FC-GPR within 30 days of allotment, and FC-TRS within 60 days for a transfer.
When you need it
Test the price before the term sheet binds you
A price agreed in principle is only as good as the numbers under it. Picture a Gurugram software startup raising its first angel round on a revenue figure that includes advances for work not yet done. Due diligence catches that while the price can still move.
Check the company before you lend to it
Here is the catch: a loan or guarantee puts you in line behind every secured creditor. Check who is ahead of you in the index of charges first.
Review the company before buying out a partner
When one promoter buys out another, the buyer takes on everything the company did while both ran it. A narrow review of tax and ROC records is still worth doing.
Frequently asked questions
Is due diligence required by law?
No, not for a private investment or purchase. The Companies Act, 2013 does not require a buyer or investor to carry out due diligence. It is a protective step you choose. Some processes do require specific reports, for example a registered valuer’s report under Section 62(1)(c) for a preferential issue. Due diligence sits alongside those and tells you whether the numbers behind them can be trusted.
What is the difference between financial, legal and tax due diligence?
Each looks at a different kind of risk. Financial due diligence tests earnings, assets, debt and working capital. Tax due diligence checks GST, income tax and TDS for unpaid tax and open disputes. Legal due diligence covers contracts, property, licences, IP and litigation, plus company law compliance. A share purchase normally needs all three; for a small deal we can narrow the scope to what matters to you.
How many years of records do you review?
Usually the last three financial years plus the current year to date. That covers most open tax assessments and recent ROC filings. If we find a disputed demand, we follow it back as far as needed. For older share issues, we check whether the premium was questioned under the old angel-tax provision, which does not apply from FY 2024-25 onwards.
What company law issues do you look for?
Mainly loans, investments, related-party deals, charges and share issues. Section 186 caps loans, guarantees and investments at 60% of paid-up capital, free reserves and securities premium, or 100% of free reserves and premium, whichever is more, unless shareholders pass a special resolution. Section 188 needs board approval for related-party contracts. We also check every allotment and transfer, so you know the cap table is clean.
Why do you check the index of charges?
Because it shows who has security over the company’s assets. Under Section 77 a charge must be registered with the ROC within 30 days of creation. A lender with a registered charge stands ahead of unsecured creditors. If a loan has been repaid but the charge is still open on the MCA V3 portal, we flag it so the company files CHG-4 before closing. It is a quick fix once spotted.
Can the company’s statutory auditor do the due diligence?
For a buyer or investor, an independent firm is better. The auditor signed the accounts you are testing. Section 144 of the Companies Act, 2013 also bars the auditor from giving certain services to the company, such as investment banking and management services. We act for you, not for the company, so the report answers your questions.
What happens if you find a serious problem?
You decide how to handle it, with the facts in hand. Common options are a lower price, an indemnity from the seller, an amount held back until a tax case closes, or a condition that the problem is fixed before you pay. Unpaid ROC fees, for example, are easy to settle: late AOC-4 and MGT-7 cost ₹100 a day, so the cost is known.
Do you keep the target company’s information confidential?
Yes. We sign a non-disclosure agreement before any document reaches us, and we use the information only for your review. Our professional rules on confidentiality apply as well. Only the team on the job opens the data room, and the report goes only to the people you name, so the seller’s information stays safe with us.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Due diligence carries no government fee; stamp duty and ROC fees on the deal filings are separate.
Ready to begin?
Tell us about the deal and the deadline, and we will send a scope and request list within one working day.