Cap Table Due Diligence Checklist for Indian Companies

Key takeaways

• Cap table due diligence for an Indian company is a verification that the internal cap table reconciles to the Register of Members under Section 88 of the Companies Act, 2013, and the PAS-3 allotment returns on the MCA portal. Because ROC filings are public, mismatches are visible before formal diligence begins.
• Investors price the round on fully diluted ownership, which adds the ESOP pool, granted options, and convertibles (CCPS, CCDs, and convertible notes) to issued shares. 
• Preferential allotments and ESOP grants require a valuation report from an IBBI-registered valuer. Allotments to non-residents require a separate valuation from a CA or SEBI-registered merchant banker under the NDI Rules 2019 pricing guidelines. 
• The FEMA trail is a separate compliance layer with no equivalent in most other jurisdictions. FC-GPR must be filed within 30 days of each allotment to a non-resident; the annual FLA return must be filed by 15 July each year; and FC-TRS is required within 60 days of any secondary transfer involving a non-resident.
• Preparation is a reconciliation exercise: before the investor's review begins, the fully diluted view should be complete and current, and every entry behind it should be backed by its documents and statutory filings.

What makes cap table diligence different for an Indian company

A cap table records who owns a company and in what proportion: founders, investors, employees holding options, and anyone holding a convertible instrument. During due diligence, an investor's objective is to verify that the ownership the company claims reconciles to the underlying statutory records.

For an Indian company, those records have two features that distinguish them from most other jurisdictions.

The first is that the primary records are partly public. The Register of Members, maintained under Section 88 of the Companies Act, 2013, is the statutory record of who holds shares. Every allotment is also recorded on the MCA portal through Form PAS-3 (Return of Allotment), which the investor can access.

The second is the FEMA reporting layer. Any company that has received investment from a non-resident (a foreign VC, an NRI angel, or an overseas fund) has mandatory RBI reporting obligations under the Foreign Exchange Management Act 1999 and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. These obligations run on timelines separate from Companies Act filings.

The internal cap table has no legal standing on its own. It is only as reliable as the statutory records and FEMA filings that sit behind it.

Why fully diluted ownership matters in diligence

Issued ownership counts only the shares already allotted. Fully diluted ownership counts those shares plus every instrument that could still become a share: the ESOP pool (both granted and reserved), compulsorily convertible preference shares (CCPS), compulsorily convertible debentures (CCDs), and convertible notes.

Investors price the round on the fully diluted figure because it reflects what they will actually own after all existing commitments convert.

A company might show founders holding a comfortable majority on an issued basis, but once the ESOP pool and a set of CCPS are included, the fully diluted picture is materially different. Any instrument left out of that calculation dilutes the incoming investor when it converts, so confirming a complete fully diluted view is the foundation of the entire review.

For a detailed explanation of how the fully diluted count is built and what each instrument contributes, see our guide to fully diluted shares.

Cap table due diligence checklist

a. Register of Members and ROC filings

The investor reconciles the cap table against the Register of Members under Section 88 and the PAS-3 on the MCA portal, which is publicly accessible.

b. Share classes and their rights

Each class carries rights set in the shareholders' agreement and the articles of association: liquidation preference, voting rights, anti-dilution, and pro-rata. These sit ahead of or alongside what the incoming investor is negotiating, so the full picture must be mapped before valuation is agreed.

c. ESOP pool and scheme approvals

The investor checks pool size, how much is granted versus reserved, and whether the scheme has shareholder approval by special resolution and an MGT-14 filing within 30 days of the resolution. Board approval alone is not sufficient; a scheme approved only by board resolution is a common Series A finding that must be resolved before closing. The investor also confirms the SH-6 register is maintained and reconciles to the granted figure in the cap table.

d. Valuation reports

Preferential allotments, ESOP grants, and allotments to non-residents each require a valuation report from a registered valuer. The investor checks that each qualifying issuance has one, that it predates the allotment, and that the valuer's credentials match what the relevant regulation requires.

e. FEMA filings

For any company with foreign investment, the investor checks three mandatory filings under FEMA 1999 and the NDI Rules 2019.

FC-GPR must be filed with the Authorised Dealer bank within 30 days of each allotment to a non-resident, covering equity shares, CCPS, and CCDs. Every prior foreign round (seed, bridge, pre-Series A) must have a corresponding filing on record.

FLA return must be filed with the RBI through the FLAIR portal by 15 July each year by any entity with outstanding FDI or ODI on its balance sheet as of 31 March, even if no new transaction occurred.

FC-TRS must be filed within 60 days of any secondary transfer between a resident and a non-resident. Secondary sales in angel rounds without FC-TRS filings are a common finding.

f. Convertible instruments

The investor lists every CCPS, CCD, and convertible note with its conversion terms and seniority, then models each conversion to establish true post-round ownership. Conversion terms that are ambiguous or undocumented create a dispute risk that investors price into the deal or require resolved as a condition precedent.

g. Board and shareholder approvals

Each issuance must carry the approval the law requires: a special resolution for preferential allotments under Section 62(1)(c), completed within 12 months, with MGT-14 filed within 30 days. The MCA record is public, so an unsupported allotment is visible from outside the company.

h. Vesting and leaver terms

The investor reads founder vesting schedules and leaver provisions. A fully vested founder with no buyback or leaver mechanism creates dead equity: an idle stake that cannot be recovered on departure and reduces what remains to motivate the team.

i. Data room documents

The investor expects: board and shareholder resolutions, PAS-3 challans, MGT-14 acknowledgements, IBBI valuation reports, the shareholders' agreement and side letters, ESOP scheme document and grant letters, SH-6 register, FIRC copies, and all FEMA filings with AD bank acknowledgements.

How to prepare your cap table before investor due diligence

1. Audit the FEMA filing history first. Confirm an FC-GPR was filed for each allotment to a non-resident, including early seed and bridge rounds where it is most commonly missed. Confirm the FLA return is current and FC-TRS covers any secondary transfers. The regularisation process takes eight to twelve weeks; starting late turns this into a deal-timing problem.

2. Reconcile the cap table to the Register of Members and ROC filings. Work through each allotment and confirm the cap table, the Register of Members, and the PAS-3 on the MCA portal show the same holder, share count, and date. Where they disagree, identify which record is correct and make any outstanding filing before the data room opens. Check stamp duty on share certificates for each allotment.

3. Confirm every issuance has its valuation report. Confirm that each preferential allotment has an IBBI-registered valuer's report. For issuances to non-residents, confirm the valuation meets the FEMA pricing guidelines. If a report is missing, commission a retrospective valuation and obtain a legal opinion before diligence begins.

4. Confirm every ESOP grant has its approvals and signed paperwork. Locate the special resolution for the scheme, the MGT-14 on the MCA portal, and the signed grant letter for each individual grant. A grant approved only by board resolution must be regularised; a grant promised but never documented should be either properly papered or removed.

5. Reconcile the ESOP pool. Establish total pool size, granted options, and reserved balance, and confirm it reconciles to the SH-6 register. Granted-but-unvested and vested-but-unexercised options should be disclosed separately.

6. Build and check the fully diluted view. Pull issued shares, granted options, the reserved pool, and all convertibles into a single calculation and confirm it matches the ownership story in your pitch deck. Use cap table modelling and scenario analysis to show how the proposed round changes ownership post-conversion.

This reconciliation is substantially easier when the underlying record has been maintained continuously rather than assembled from spreadsheets at the last moment.

EquityList maintains the fully diluted cap table, ESOP records, and convertible instruments in one record, so the view investors ask for first is current at any point. The scenario analysis tool lets you model how a proposed round changes ownership post-conversion before the term sheet is signed, and the cap table ledger exports the record in the format a diligence data room requires.