📝 Due Diligence Checklist When Investing in Unlisted Shares

Summary: Before you commit capital to a private company, run through these eight essential due-diligence steps to safeguard your investment.

1. Corporate Documents

Review Articles of Association, board resolutions, share-subscription agreements, and key contracts.

2. Financial Statements

Audit the last 3 years of P&L, balance sheets, and cash-flow statements—look for revenue consistency and margin trends.

3. Capital Structure & ESOPs

Analyze the cap table: founder stakes, investor tranches, and the size of ESOP pools to estimate future dilution.

4. Legal & Regulatory Compliance

Check for pending litigation, license validity, and adherence to sector-specific regulations.

5. Market & Competitive Position

Evaluate market size, growth drivers, competitive moat, and customer concentration risks.

6. Management & Promoter Background

Investigate founders’ track records, previous exits, and any reputational red flags.

7. Liquidity & Exit Potential

Understand lock-in periods, planned IPO timelines, and clause rights (buy-back, tag-along) in shareholders’ agreements.

8. Valuation Sensitivity Tests

Stress-test valuation assumptions against 10–20% swings in revenue growth, margin, and liquidity discounts.