Before fundraising due diligence, assume investors will test whether your legal records tell the same story as your cap table, books, bank and tax filings. Common issues include unrecorded share changes, missing MCA forms, GST/TDS gaps, unpaid payroll dues, unsupported related-party transactions, missing IP assignments, unsigned contracts and unresolved tax notices. Different investors ask for different files, but inconsistent records repeatedly slow transactions.
What this means for you
A pre-DD health check should find contradictions before investor counsel does.
Who this applies to
Indian startups preparing angel, seed, venture, strategic or debt diligence.
Why this problem happens
Early-stage companies optimise for speed; event-based filings and founder arrangements can lag behind reality.
What should be checked immediately
Use an indexed checklist rather than scattered messages. The exact documents vary by issue, but the records below should be under business control before any filing, correction or response.
| DD area | Common problem | Evidence |
|---|---|---|
| Cap table | MCA/register mismatch | Share/MCA records |
| GST/TDS | Returns/payment gaps | ARN/challan/recon |
| Income tax | Unresolved notice | ITR/order/e-Proceedings |
| IP | No founder/consultant assignment | IP agreements |
| Contracts | Unsigned key contracts | Executed copies |
| Books/bank | Unsupported balances | TB + bank recon |
What to do now
Build a red/amber/green tracker. Red = missing legal filing/payment; amber = inconsistent or open; green = complete, reconciled and evidenced.
Practical hypothetical example
A startup cap table shows a founder transfer completed commercially, but statutory records and consideration evidence were never updated. The issue may be curable, but it should be identified before the investor asks why ownership documents conflict.
What happens if this is ignored
DD gaps can delay closing, create conditions precedent/indemnities or reduce confidence in the finance function.
What TargoLegal checks before filing or responding
TargoLegal would create a source-indexed compliance data room and an open-issues memo, not hide unresolved items.
What the customer should approve and receive
Before filing or response
Receive the issue summary, pending-document list, proposed figures/treatment, deadline and payment impact. Material assumptions should be visible.
After submission
Receive the filed return/form or response, government acknowledgement, payment proof and a short open-items list.
Do not make the handover or correction harder
Statutory deadlines continue.
Keep portal access under business control.
Rebuild from source records and prior filings.
Every completed filing should leave an official trail.
What to send for a first review
Raising soon? Ask for a pre-DD compliance health check; send the entity type, funding stage and whether a data room already exists.
Related questions
How do I know the filing or response is actually complete?
Look for the official acknowledgement/status on the relevant government portal and retain the filed copy. A payment receipt or provider message is not enough.
Should I share my portal password with a new provider?
Prefer official authorisation, secure reset and business-controlled access. Do not send passwords or OTPs through uncontrolled chats.
Can I blame the previous adviser in the government response?
A statutory response should focus on facts, law and evidence. Private responsibility with a provider is a separate issue unless legally relevant.
What should I approve before filing?
You should receive a concise summary of figures, differences, payment/correction proposed and unresolved risks before submission.
What should I keep afterwards?
Keep the filed form/return, acknowledgement, payment proof, reconciliation and any response/order in a business-controlled archive.
Official sources used
Legal and portal claims were anchored to the official references below. Forums and customer complaints were used only to understand real-world confusion, never as legal authority.
TargoLegal Research and Editorial Desk · Last legally reviewed: 18 August 2026. Recheck live forms, notifications, portal workflows and response dates immediately before acting.
