Secretarial Due Diligence

It is an examination of a company's corporate records and filings to confirm that it has complied with the Companies Act, its own articles and related laws such as FEMA. It is done for a buyer, investor or lender before a transaction to confirm the company's legal standing and the validity of its shares, and to find defaults that need fixing or protection in the agreement.

Financial due diligence looks at earnings, cash, debt and tax exposures to support the price. Secretarial due diligence looks at corporate law compliance: share issues, approvals, filings, registers, directors and charges. Most transactions need both, because a business can be profitable and still have shares or approvals that are legally defective.

No. A secretarial audit under Section 204 of the Companies Act is a recurring statutory requirement for listed companies and certain large public companies, reported in Form MR-3. Secretarial due diligence is a one-time review commissioned for a specific transaction, with a scope set by the party relying on it and a focus on risks to that deal.

Before an acquisition of shares or a business, a private equity or angel investment, a merger, demerger or amalgamation, a joint venture, a large loan against shares or assets, or a planned listing. Promoters also commission it before a fundraise or sale so that defaults can be fixed before an investor finds them.

The certificate of incorporation, memorandum and articles, statutory registers, minutes of board and general meetings, annual and event-based ROC filings, share certificates and transfer records, the register of charges, related party approvals, director appointments and DIN status, beneficial ownership declarations, and FEMA filings for any foreign investment.

The buyer or investor is acquiring shares, so each allotment and transfer since incorporation must be valid. We check that authorised capital covered each issue, that the right board and shareholder resolutions were passed, that private placement or rights issue rules were followed, that return of allotment filings were made, and that transfers were stamped and approved.

Depending on the defect, the allotment may be open to challenge, the money may have to be refunded with interest, or penalties may apply. Many defects can be regularised through late filings, ratification, compounding or adjudication before completion. Where they cannot, the agreement needs specific indemnities or the deal structure has to change.

Annual filings such as financial statements in AOC-4 and the annual return in MGT-7 or MGT-7A, auditor appointments, director KYC, and event-based forms for allotments, director changes, registered office changes, charges, deposits and beneficial ownership. We check that each was filed, filed on time and matches the minutes and registers.

Missing or unsigned minutes, allotments without the required resolutions or return of allotment, unstamped share transfers, unregistered charges, loans to directors or related parties without approval, annual filings pending for several years, disqualified directors or deactivated DINs, missing beneficial ownership filings, and late or missing FEMA reports on foreign investment.

If a company has not filed its financial statements or annual returns for three continuous financial years, its directors become disqualified under Section 164(2) and cannot be reappointed or appointed elsewhere for five years. This affects who can remain on the board after completion and points to a long compliance gap the buyer will have to clear.

A charge over company assets must be registered with the Registrar within the time allowed, and a charge that is not registered is generally not valid against a liquidator or other creditors. The buyer also needs to know whether satisfied charges have been closed on the MCA record, since an open charge can hold up future borrowing or asset sales.

Often, yes. Late filings can be made with additional fees, decisions can be ratified by the board or shareholders where the law allows, registers can be rectified, and many offences can be compounded under Section 441 or penalties adjudicated under Section 454. We list which defaults to cure before completion and which to cover through indemnities.

Yes, where the company has received foreign investment or invested abroad. We check pricing guidelines on share issues and transfers to or from non-residents, reporting of allotments and transfers on the FIRMS portal, the annual return on foreign liabilities and assets, and sectoral conditions. FEMA delays can attract late submission fees or compounding by the Reserve Bank of India.

It is strongly advised. In a merger the transferee company inherits the transferor's compliance history, and the scheme filed with the National Company Law Tribunal, or under the fast-track route for eligible companies, depends on correct share capital, shareholder records and creditor details. A review of each company identifies gaps before the scheme is filed.

A clean cap table that matches the register of members and ROC filings, valid issue of each funding round, investor rights properly reflected in the articles, ESOP schemes approved by special resolution, convertible instruments correctly documented, founders' shares fully paid, and FEMA reporting on any foreign round.

Yes. In addition to the Companies Act review, a listed company must comply with SEBI regulations on disclosures, insider trading and related party transactions. An acquirer also has to consider the takeover regulations, under which crossing specified shareholding thresholds can trigger a mandatory open offer to public shareholders.

For a small or mid-sized private company it commonly takes one to a few weeks once records are shared. The time depends on the company's age, the number of share issues and transfers, how well the registers and minutes have been kept, and how quickly the target answers queries. Public MCA filings can be reviewed from the start.

An executive summary of the key findings graded by risk, followed by sections on constitution, share capital, directors and key managerial personnel, meetings and minutes, ROC compliance, charges and borrowings, related party transactions, FEMA and other approvals, each with the remedy and suggested conditions precedent or warranties for the agreement.

The fee depends on the number of companies, the years covered, the volume of share capital events and the timeline. We quote a fixed fee after understanding the deal and the records available, and can carry out the review together with financial due diligence so that both reports come from one team.

Yes. Vendor secretarial due diligence lets promoters find and fix gaps such as pending filings, unrecorded transfers or missing approvals before buyers or investors see them. It shortens the buyer's review, reduces the number of conditions and indemnities demanded, and avoids last-minute delays in closing the deal.