Companies Act, 2013 (Sections 230–240) / Income-tax Act, 2025 (formerly Income-tax Act, 1961) / FEMA 1999 / Competition Act, 2002

M&A, Financial & Tax Due Diligence

Rigorous financial, tax, secretarial, and operational due diligence services tailored to help private equity investors, venture funds, and corporate acquirers uncover hidden liabilities, validate EBITDA, and de-risk transactions.

CA Due Diligence

Official Portal Filing

State Stamp Advisory

M&A, Financial & Tax Due Diligence Statutory Advisory

Turnkey Statutory Filing

MCA & Tax Practice

Official Govt of India AuthorityMinistry of Corporate Affairs (MCA), Central Board of Direct Taxes (CBDT), Reserve Bank of India (RBI) & CCI

M&A, Financial & Tax Due Diligence Official Portal

Official government portal for M&A, Financial & Tax Due Diligence filings, statutory compliances, and clearances.

Visit Govt Portal

STATUTORY OVERVIEW

Transaction Advisory, Quality of Earnings (QoE) & Comprehensive M&A Due Diligence

In cross-border acquisitions, domestic mergers, strategic joint ventures, and venture capital rounds, unverified balance sheet claims and concealed statutory liabilities can destroy deal value overnight. Regulatory exposures, unhedged tax disputes under the Income-tax Act, 2025 (and Income-tax Act, 1961), hidden loan covenants, or undisclosed litigation can transform an apparently lucrative target into a massive legal liability. Our Due Diligence practice executes forensic, independent investigations across books of account, Quality of Earnings (QoE), tax compliance histories, contingent exposures, and secretarial hygiene under the Companies Act, 2013, giving acquirers unparalleled negotiation leverage and closing confidence.

Statutory & Practice Summary • At-A-Glance

ICAI UDIN Authentication Mandate

Governing Framework

Companies Act, 2013 (Sections 230–240) / Income-tax Act, 2025 (formerly Income-tax Act, 1961) / FEMA 1999 / Competition Act, 2002

Regulatory Authority

Ministry of Corporate Affairs (MCA), Central Board of Direct Taxes (CBDT), Reserve Bank of India (RBI) & CCI

Professional Assurance

Chartered Accountants Attestation under ICAI Standards & Code of Ethics

DOCUMENTATION MATRIX

Mandatory Documents Checklist

Self-attested scanned copies required

1. Promoters / Partners / Directors KYC

✓Audited Balance Sheets, P&L Statements & CARO Audit Reports for Past 5 Years
✓Detailed Trial Balances, General Ledgers & Chart of Accounts for Current Stub Period
✓Monthly Revenue Registers, Customer Master Contracts & Order Pipeline Schedules
✓Vendor Contracts, Operating Lease Agreements & Key Supplier Price Agreements

2. Registered Office & Premises Proof

✓All Direct Tax Returns (ITR-6), Assessment Orders & Pending Appeal Submissions
✓GST Returns (GSTR-1, 3B, 9) & Reconciliation Statements with 2A/2B Portals
✓Complete Cap Table, Share Allotment Forms (PAS-3) & MCA Secretarial Registers
✓Schedule of Existing Bank Borrowings, Hypothecation Charges & CIBIL Commercial Reports

PROCEDURAL ROADMAP

Step-by-Step Filing & Approval Process

Structured execution roadmap managed by our Chartered Accountants from pre-filing due diligence to certificate allotment.

01Standard

Scoping & Virtual Data Room (VDR) Inception

Defining engagement scope (Buy-side or Sell-side), executing NDAs, and structuring the secure Virtual Data Room request list.

02Standard

Fieldwork & Earnings Normalization

Detailed forensic review of financial statements, tax filings, QoE bridges, working capital peg analysis, and management interviews.

03Standard

Red Flag Memo & Interim Findings

Issuing interim Red Flag Memorandum highlighting critical deal-breakers, hidden liabilities, and valuation adjustment items.

04Standard

Definitive Due Diligence Report & SPA Support

Delivering certified Due Diligence Report and drafting specific indemnity, warranty, and escrow clauses for the Share Purchase Agreement.

Financial Due Diligence & Quality of Earnings (QoE) Analysis

Practice Scope & Statutory Guidance

We dissect target company historical earnings to determine sustainable, run-rate cash flows. Our audit investigates revenue recognition practices, non-recurring exceptional items, owner compensation normalization, working capital peg adjustments, inventory obsolescence provisions, and related-party transaction terms under Section 188 of the Companies Act, 2013.

Tax Due Diligence & Section 281 Direct Tax Clearance

Practice Scope & Statutory Guidance

Tax exposures represent the most severe unrecorded risk in Indian corporate acquisitions. We audit direct tax assessments, pending faceless appeal proceedings, transfer pricing documentation, GST input credit eligibility, and historic withholding practices under the Income-tax Act, 2025 (formerly 1961 Act). Furthermore, we evaluate Section 281 tax clearance requirements to ensure asset transfers cannot be declared void by the tax department.

Legal, Secretarial & Cross-Border FEMA Diligence

Practice Scope & Statutory Guidance

Our secretarial diligence reviews share capital history, validity of past allotments on mca.gov.in, promoter share pledges, board resolutions, key customer contracts, IP ownership, and foreign investment compliance under FEMA (FDI pricing guidelines, FIRC, and FC-GPR filings on the RBI portal).

STATUTORY MATRIX

Statutory Provisions & Regulatory Comparative Matrix

Comparative analysis of governing sections under the new framework alongside legacy statutory references.

Diligence Investigation Area	Statutory Reference / Portal	Common Red Flags Discovered	Transactional Mitigation / Deal Impact
Quality of Earnings (QoE)	ICAI Accounting Standards / Ind AS	Inflated revenues, capitalization of R&D expenses, unprovided bad debts	Direct purchase price reduction / EBITDA multiple adjustment
Direct Tax Assessments & Appeals	Income-tax Act, 2025 (formerly 1961 Act) / https://www.incometax.gov.in/	Demands stayed under dispute, unfiled transfer pricing Form 3CEB	Specific indemnities and special escrow account holdbacks
Asset Transfer Tax Clearance	Section 281 of Income-tax Act, 1961 / 2025 Act	Assets transferred without tax officer NOC during assessment pendency	Transaction void against IT department; mandatory Section 281 clearance
Cross-Border FDI Compliance	FEMA (NDI) Rules, 2019 / https://www.rbi.org.in/	Delayed FC-GPR filing, non-compliant valuation below RBI floor price	Mandatory RBI compounding process prior to closing transaction
Secretarial & Corporate Title	Companies Act, 2013 / https://www.mca.gov.in/	Defective share allotment, unfiled PAS-3, undocumented promoter pledges	Conditions Precedent (CP) to be rectified prior to fund disbursement

ONGOING GOVERNANCE

Mandatory Post-Registration Compliances

Failing to complete statutory post-incorporation actions carries steep daily penalties. Our CA firm manages continuous compliance:

CompliancePeriodic

Tax Clearance Certificate (Section 281)

Obtaining statutory clearance from the Income Tax Assessing Officer under Section 281 on incometax.gov.in prior to asset transfer.

CompliancePeriodic

ROC Charge Modification / Satisfaction (Form CHG-4)

Filing electronic satisfaction of bank charges on mca.gov.in upon paying off target company legacy loans at closing.

CompliancePeriodic

RBI FC-TRS Cross-Border Share Transfer Filing

Submitting Form FC-TRS on the RBI FIRMS portal within 60 days of share transfer between resident and non-resident parties.

CompliancePeriodic

Competition Commission of India (CCI) Notification

Mandatory pre-merger notification filing if transaction asset or turnover values breach Section 5 combination thresholds.

FREQUENTLY ASKED QUESTIONS

Statutory FAQs & Practical Guidance

Authoritative answers to common questions regarding M&A, Financial & Tax Due Diligence.

What is Quality of Earnings (QoE) and how is it different from a statutory audit?

A statutory audit verifies whether financial statements are free of material misstatement according to historical accounting standards. A Quality of Earnings (QoE) review evaluates the operational quality and sustainability of earnings, normalizing EBITDA for one-time revenue gains, related-party management fees, owner perquisites, and changes in accounting policies to determine true recurring cash flows.

Why is Section 281 of the Income-tax Act critical in corporate acquisitions?

Under Section 281 of the Income-tax Act, 1961 (and corresponding provisions under the Income-tax Act, 2025 on incometax.gov.in), any creation of a charge or transfer of assets during the pendency of any income tax proceeding is void as against any claim in respect of any tax liability. Acquirers must ensure a formal tax clearance certificate or written NOC is obtained to prevent the tax department from seizing target assets.

What happens if foreign shareholding filings under FEMA were omitted by the target?

Failure to file Form FC-GPR or follow RBI pricing guidelines under FEMA (https://www.rbi.org.in/) renders foreign share allotments non-compliant. Before closing, the buyer must insist on regularizing the default through an RBI compounding application or require specific indemnities and financial holdbacks in the SPA.

How long does a comprehensive due diligence review typically take?

A standard financial and tax due diligence engagement typically requires 2 to 4 weeks depending on the quality of data provided in the Virtual Data Room (VDR), transaction complexity, and availability of target management for diagnostic interviews.

STATUTORY ADVISORY DESK • ICAI COMPLIANT

Statutory Inquiries & Practice Advisory

In strict conformity with ICAI Council Guidelines No. 1-CA(7)/06/2004, professional engagements for M&A, Financial & Tax Due Diligence are accepted following formal conflict verification and statutory documentation. Contact our registered practice offices for procedural guidance.

Contact Practice Office +91 99140-14949