Legal Due Diligence Checklist for Buying or Investing in an Indian Company

Legal due diligence is a structured review of a target company, business or investment opportunity before signing or closing a transaction. It helps a buyer or investor verify ownership, authority, assets, contracts, disputes, people, intellectual property and regulatory position.

A checklist is a starting point, not a complete scope for every deal. The depth should reflect the sector, transaction structure, ownership percentage, geography, risk tolerance and findings as they emerge. Legal review should also be coordinated with financial, tax, technical, cyber, environmental and commercial diligence.

Legal due diligence workstream table

Use this table to define the review scope, evidence and transaction consequence for each workstream.

Set the due diligence scope before requesting documents

A focused scope makes the data room easier to manage and directs attention to issues that can change price, structure, protection or closing.

Transaction and risk profile

Identify whether the deal is a share purchase, asset purchase, primary investment, secondary transfer, joint venture or lending transaction. Review the sector, jurisdictions, proposed control and intended post-closing operations to decide which workstreams require specialist attention.

Materiality and review period

Set monetary and operational thresholds for contracts, disputes and liabilities. Define the historical period and exceptions for foundational matters such as title, intellectual property, environmental exposure or continuing regulatory breaches.

Process, access and privilege

Use a request list, indexed data room, question log and findings tracker. Control access to personal data, competitively sensitive information and privileged documents. Highly sensitive records may require redaction, clean-team access or staged disclosure.

Review incorporation, ownership and authority

Corporate diligence tests whether the target exists validly, who owns its securities and whether important actions were properly approved.

Constitutional and registration records

Review the certificate of incorporation, memorandum, articles, registered office, statutory registers and relevant filings under the Companies Act, 2013. Compare the company’s records with official master data available through the Ministry of Corporate Affairs.

Capitalisation and title to securities

Reconcile issued shares and other securities with registers, certificates, depository records, allotments, transfers, option plans, convertibles, pledges and beneficial ownership disclosures. Investigate gaps between the capitalisation table and statutory evidence.

Board and shareholder approvals

Review minutes and resolutions for major issuances, borrowings, guarantees, related-party transactions, acquisitions and changes in management. Confirm authority to enter the proposed transaction and identify approvals or waivers needed before closing.

Examine financing, assets and property

The legal review should establish what the target owns or uses and what security, restriction or third-party interest affects it.

Debt and security

Review loan agreements, credit facilities, guarantees, charges, covenants, defaults and change-of-control provisions. Reconcile corporate filings with lender documents and identify releases, consents or repayment steps required at closing.

Material assets

Check title, invoices, registrations, leases, licences and encumbrances for business-critical assets. For leased premises, review term, renewal, use, assignment, deposit, fit-out, compliance and termination rights.

Insurance

Review policy types, limits, exclusions, claims history, named insureds and continuity after the transaction. Insurance is not a substitute for assessing the underlying operational or legal exposure.

Analyse material contracts

Contracts can reveal revenue dependence, operational restrictions and consent requirements that are not visible in financial summaries.

Customers and suppliers

Review major customer, distributor, vendor, manufacturing, logistics and services agreements. Focus on term, renewal, concentration, pricing, service levels, exclusivity, minimum commitments, termination, liability and disputed performance.

Change of control and assignment

Identify clauses that permit termination, require consent or alter economics when ownership or control changes. The effect depends on the transaction structure and exact wording; do not assume a share transaction is outside every restriction.

Related parties and unusual commitments

Review founder, affiliate and related-party arrangements, side letters, guarantees, most-favoured terms and commitments outside standard contracts. Determine whether they continue on arm’s-length terms after closing.

Investigate disputes and compliance

Known claims and compliance gaps may require remediation, price adjustment, specific indemnity or a condition to closing.

Litigation, arbitration and notices

Collect pleadings, notices, orders, legal opinions, settlement documents and management updates for current, threatened and recently concluded matters. Assess exposure, defence, insurance, injunction risk, enforcement and business impact.

Licences and sector regulation

Verify licences, permits, registrations, renewals, conditions, inspections and correspondence with authorities. Determine whether the transaction itself needs approval, notification or a new licence.

Anti-bribery, sanctions and internal compliance

Review policies, training, whistleblowing, investigations, gifts and intermediary arrangements in proportion to the target’s risk. Cross-border operations, government dealings and regulated customers may require specialist review.

Review intellectual property, technology and data

A business may depend on assets that are used every day but not legally owned or transferable.

Ownership and chain of title

Review registrations, applications, assignments and creator or contractor agreements for trademarks, patents, copyright, designs, domains, software and databases. Confirm that founders, employees and consultants granted the rights the target claims to own.

Licences and open-source software

Identify inbound and outbound licences, restrictions, royalties, source-code obligations and termination rights. For software, assess open-source use and whether licence terms are compatible with the target’s distribution and business model.

Privacy and cybersecurity

Map significant personal-data processing, notices, consents or other legal bases, contracts, security controls, incidents, retention and cross-border arrangements as applicable. Review the Digital Personal Data Protection Act, 2023 and sector duties against current commencement and applicability for the target.

Assess employees, consultants and key people

Review employment and consultancy templates, key-person terms, compensation, incentives, statutory benefits, contractor arrangements, policies, disputes and notices. Confirm assignment of intellectual property and confidentiality obligations for people who created core assets.

Identify change-in-control payments, retention needs, restrictive covenants and gaps between written terms and actual practice. Employment, labour and tax issues may require specialist analysis and separate calculations.

Turn findings into transaction action

A diligence report is useful only when findings are prioritised and connected to a decision or document.

Classify the finding

Distinguish missing information, confirmed breach, contingent exposure, operational weakness and deal blocker. Record the source, affected entity, estimated impact where supportable, owner and next step.

Choose the response

A finding may lead to clarification, remediation before signing, condition precedent, consent, covenant, price adjustment, escrow, retention, warranty, specific indemnity or a decision not to proceed. The response should reflect control, probability, impact and ability to verify correction.

Closing and post-closing plan

Use a responsibility matrix for approvals, consents, releases, filings, document delivery and funds flow. Carry unresolved items into a dated post-closing plan with evidence requirements rather than letting them disappear from the diligence tracker.

Common due diligence mistakes

For the transaction documents, use the business contract review checklist and review governance protections in the shareholders’ agreement guide.

• Using a generic request list without adapting it to the sector or deal structure.
• Treating an absent document as proof that no liability exists.
• Reviewing summaries without checking executed agreements and amendments.
• Ignoring change-of-control, consent and termination language in material contracts.
• Failing to reconcile the capitalisation table with statutory and depository records.
• Reporting issues without connecting them to price, protection, closing or remediation.

How EA Legal can support legal due diligence

EA Legal’s corporate lawyers in Bangalore assist buyers, investors, founders and companies with legal due diligence, transaction documentation, disclosures, conditions and closing support.

This article is general information and not legal advice. Each transaction requires a tailored scope and coordination with financial, tax, regulatory and other specialists.

Frequently asked questions

These answers provide a general starting point. The correct position depends on the documents, parties, transaction and applicable law.