Compliance Checklist for Investors

This article explains what investors look at before investing in a company and the things that you should concentrate on if you are looking to raise investments for your business in the future.

For any start-up, it has become a trend to raise capital and equity funding. This model has gained immense popularity in the last decade with the success of e-commerce companies like Snapdeal, Flipkart, In-Mobi and many more.

This has become an important function for the start-ups as well as for many existing companies. The start-up culture has gained tremendous momentum in recent years, and this has led to the growth of an active angel investor community, private equity funds and also venture capital investors.

All the equity investors who are willing to make an investment usually conduct an investment due-diligence to determine the prospect which eventually leads to their investment decisions.

Entity of Business

The concept of equity investment demands the issuance of the shares of the company to the concerned investor in exchange for shares or equity.

This facility can be availed only by a private limited company or a limited company which are eligible to support such transaction as per the laws.

So, to raise funding, the first step is to incorporate a private limited or a limited company if not already done.

It should be taken care during the incorporation that the Memorandum of Association and also the Articles of Association of the Company are being drafted accordingly to handle the equity investment without any form of amendments to the AOA or MOA.

ROC Compliance

The concerned company should mandatorily maintain a statutory register, and the company is also required to compile all the provisions of the Companies Act, 2013.

There are certain statutory compliances which are required post incorporation of a company. These regulatory compliances include appointing of an auditor, conducting of board meetings, statutory register’s maintenance and statutory annual returns.

Also, due-diligence is carried out by the investor before making an investment decision.

Tax Compliance

Tax compliance for any business entirely depends on the nature of the business and also the state of operation. For example, the companies which are involved in the selling of products have to necessarily comply with the state VAT regulations which include the VAT registration as well as the VAT payments and returns.

There are businesses which involve providing the services that obtain the service tax registration and also make the file service returns.

Along with the above, the VAT regulations or service tax, income tax compliance are also thoroughly checked.

The TDS payments and also the TDS return filing are checked to ensure that the particular business complies with the set of prevailing Income Tax rules and regulations.

Compliance with Labour Law

If the concerned company has an employee base of more than 20, then the business has to necessarily comply with PF and ESI regulations.

Hence, the ESI return filing, ESI registration documents, ESI payments, PF return filing and PF payments have to be checked.

If the concerned company deals in the development of intellectual property, then there should be necessary employee non-disclosure agreements signed for security.

Intellectual Property

For any technology based firm, the biggest asset of the particular company is its intellectual property.

Therefore, in such cases, the investors have to enquire that the intellectual properties of the enterprise like patent, design, trademark and copyright are well-protected using copyright registration, trademark registration or registration of patents.


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