Startup compliance checklist India: what investors check

Missed ROC filings and GST gaps rarely kill a company. They do kill a round when they surface in week six.

Compliance is the last of the six checks in our guide to evaluating early-stage startups in India, and it's the one investors most often leave until the lawyers arrive. That's a mistake. You can run most of it from public filings and two or three documents you request. It takes an afternoon. Finding the same gap after the term sheet takes weeks.

Diligence time is under pressure. Indian tech companies closed 1,134 funding rounds in the first nine months of 2026, down 38%, according to Tracxn's 9M 2026 report (tech only, 1 January to 21 September). Fewer rounds, closer reading. And in a survey of venture capitalists, mostly in the US, the average deal took 83 days to close. Week six is right in the middle of that.

What a startup compliance check covers

A startup compliance check in India confirms that the company has filed what the law requires with three sets of regulators: the Registrar of Companies under the Ministry of Corporate Affairs, the tax authorities for GST and TDS, and the Reserve Bank of India for any foreign investment. Sector licences come on top, where the business needs one.

You're not auditing the company. You're checking whether its paperwork tells the same story as the founder, and whether anything still open could delay your money or land on your desk a year from now. Keep it that narrow. You'll finish faster.

ROC filings and share allotments

Start at the Registrar of Companies, because these filings are public and they tell you who owns the company. Look for the annual accounts and annual return for each year since incorporation, director KYC, and a return of allotment for every share issue. Gaps here usually mean gaps in the cap table too.

Annual filings

Pull the company's master data and filing history from the Ministry of Corporate Affairs. Each year should show an AOC-4 for the accounts and an MGT-7 for the annual return. Missing years happen. Two missing years in a row is a pattern, and you'll want to hear the founder explain it in their own words before your lawyer does.

Share allotments

Every share issue needs a PAS-3 return of allotment. Legitpro Law notes in a Legal 500 article that it should be filed within 30 days of allotment. Line each PAS-3 up against the founder's cap table. If a shareholder appears in the spreadsheet with no allotment filing behind them, the spreadsheet is wrong or the filing is missing. Either way, it's your problem soon. We cover the patterns in cap table red flags before investing.

Tax and foreign money

Tax filings test the revenue, and foreign-investment filings test the ownership. Ask for GST returns and TDS returns for the last two years, and the company's income tax returns. If any foreign investor holds shares, ask for the FC-GPR filed with the Reserve Bank of India for each allotment. These documents aren't public, so how fast they arrive tells you something too.

GST against the MIS

Here's a test you can run in twenty minutes. Put the monthly revenue from the GSTR-1 returns next to the revenue in the founder's MIS. Do they agree? Timing gaps of a month are normal. A gap that grows each quarter isn't, and it's a quick way to spot a deck number that's been rounded up. Our post on verifying startup revenue and client contracts takes the check further, down to invoices and bank receipts.

Foreign investment reporting

If an overseas angel or fund came in, the company had to report the allotment to the RBI on an FC-GPR. The Legal 500 article puts that deadline at 30 days from allotment, and says a late filing means a compounding application and a penalty. It's fixable. You'd just want it fixed before your money arrives. Not after.

Older rounds and angel tax

The Finance Minister's speech of July 2024 proposed abolishing the so-called angel tax for all classes of investors, according to the Union Budget speech text. For rounds raised before that change, ask what valuation support the company kept and whether any tax notice followed. Your own tax adviser should read the answer. This post is a checklist, not tax advice.

How to read what you find

A compliance gap is a finding about the company's past; how the founder handles it is a finding about the future. Most gaps can be fixed with late fees or a compounding application. What changes your view is whether the founder knew, disclosed it before you asked, and has a plan to close it.

A late filing costs the company a fee. A hidden one costs you the round.

So list each gap, put it to the founder yourself, and agree with them what gets fixed before your money moves. Some investors write the fixes into the term sheet as conditions. That's normal, and founders who run a clean company won't mind.

The checklist

Run these before the term sheet, not after. You'll have most of it from public filings and three document requests.

• ROC: AOC-4 and MGT-7 for each year since incorporation, and director KYC.
• Allotments: a PAS-3 behind every line of the cap table.
• GST and TDS: two years of returns, with GSTR-1 revenue set against the MIS.
• Foreign money: an FC-GPR for each allotment to an overseas investor.
• Sector: any licence or registration the business needs to operate.

Compliance is one of the six due diligence parameters our team evaluates on MyStartupValley, with founder verification, market sizing, cap table, legal and client agreements. To start from companies where that work is done and written up, see the investor workspace.

Questions

What compliance checks should an investor run on an Indian startup?

Check annual ROC filings (AOC-4 and MGT-7), a PAS-3 return for each share allotment, director KYC, GST and TDS returns, and, if any foreign investor holds shares, the FC-GPR reported to the Reserve Bank of India. Then check any licence the company's sector requires.

Can a startup with missed ROC filings still raise money?

Usually, yes. Most missed filings can be made good with late fees and, in some cases, a compounding application. Investors often make the fix a condition before the money goes in. What matters more is whether the founder knew and disclosed the gap before diligence found it.

How do investors use GST returns in due diligence?

They compare the revenue declared in GST returns with the revenue in the founder's MIS and deck, month by month. Small timing differences are normal. A persistent gap means the numbers need explaining before anyone relies on them.

Sources: Tracxn, India Tech 9M 2026 report, via CXOToday, 24 Sep 2026 · Gompers, Gornall, Kaplan and Strebulaev, How Do Venture Capitalists Make Decisions?, NBER Working Paper 22587, 2016 (Journal of Financial Economics, 2020) · Legitpro Law, Road beyond the term sheet: legal considerations in startup funding, Legal 500, 11 Jun 2026 · Ministry of Finance, Budget Speech 2024-25, 23 Jul 2024