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Investor Compliance Checklist

India has witnessed a boom in the startup industry in last decade. This exponential rise in startups is the major reason behind the development of venture capital investors, strong angel investor community and private equity firms that have been acting as a major source of raising capital for the startups. However, these investors prior to investing in a company, conduct an investment due diligence of the company they intend to invest in on a myriad range of areas. This blog focuses on creating an Investors Compliance Checklist which verifies that the investee is compliant with prescribed rules and regulations and is not a defaulter.


Business Entity
Equity investment involves the issuance of company shares to the investors in lieu of equity/shares. Such transaction can only be supported by a limited company or private limited company due to their capability to do so. The first step in the process of raising the capital is to incorporate a business entity (company or LLP), if not done already. It is imperative, irrespective of the age of the company, to ensure that Memorandum and Articles of Association of the company are drafted such that the equity investments can be handled without amending the MOA or AOA.

ROC Compliance
The company must be in compliance with all provisions of Companies Act, 2013. It is mandatory for a company to maintain a statutory register. Appointment of auditor, filing of statutory annual returns, conducting board meetings and maintenance of statutory registers are some of the primary post incorporation compliances of a company. During the investment due diligence process the ROC compliance related to aforementioned areas is verified.

Tax Compliance
Different nature of business and state of business operation results in differenttax compliances for a business. For example, business involved in trading of goods and products needs to comply with state VAT regulations, including sales tax registration, sales tax payments and filing of sales tax returns. Similarly, businesses involved in rendering services are liable to obtain service tax registration, file service tax returns and make service tax payments. Additionally income tax compliance is also verified during investment due diligence process which includes TDS payments and TDS return filing.

Labour Law Compliance
The ESIC registration documents, PF registration documents, ESIC and PF return filing,the ESIC payments and PF payments and other ESIC and PF regulation compliances are checked for the investee company having more than 20 employees.

Intellectual Property
The protection of intellectual property of a business in the form of trademark, copyright, patent or design is one of the critical assets of the company. Hence, Investors Compliance Checklist always verify whether the relevant trademark registrationcopyright registrationpatent registration or design registration of the company is done to protect the intellectual property of the company. Therefore, whether the registration certificate is issued or not, investors would like to verify the intellectual property registration by asking for the proof of trademark application filing, patent application filing, copyright application filing or design application filing.

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About Setindiabiz

Setindiabiz is an organized team of experienced CA, CS, & Lawyers, duly supported by a pool of trained accountants & paralegal staff that provides quality & affordable compliance services to startups & small businesses in India. The views, statements and recommendations expressed in this article or post are only for the sole objective of providing information, and it does not constitute professional advice or recommendation of the company. Neither the author nor the company or its affiliates accepts any liability for any loss or damage arising from any information in this article or any actions taken in reliance thereon.

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