ESOP Due Diligence Prep for Funding and M and A

You have signed the term sheet, and due diligence is about to begin. This is exactly when ESOP gaps surface, a missing MGT-14, a stale SH-6, a cap table that does not reconcile, and they delay or even derail the round. Patron Accounting runs a pre-DD audit of your ESOP records and remediates the gaps before the investors look, so diligence is a verification, not a negotiation.

ESOP failures do not surface when they happen; they surface in diligence, when fixing them is expensive and slow. A scheme approved without a special resolution, options granted without a signed letter, a register that stopped being updated two years ago, all of it stays invisible until an investor's auditor opens the data room. This service finds and fixes it first.

Content is reviewed quarterly for accuracy.

The ESOP data room, through an investor's eyes, comes down to four checks:

• The approvals: did a special resolution approve the scheme, and was MGT-14 filed in time?
• The register: is the SH-6 register complete and current, with every grant, vesting, exercise and forfeiture?
• The valuations: is there a registered-valuer FMV at grant and at each exercise, and are past allotments supported?
• The reconciliation: does the cap table tie exactly to the statutory registers, the resolutions and the grant letters?

• ESOP compliance audit: we review the scheme, resolutions, MGT-14 and PAS-3 filings, the SH-6 register, valuation history and grant letters against the DD checklist.
• Cap-table reconciliation: we reconcile the cap table to the statutory registers, board resolutions and grant records, resolving every discrepancy.
• Filing remediation: we file missing MGT-14 and PAS-3 returns, manage the late fees, and regularise defective approvals.
• Valuation clean-up: we obtain the missing registered-valuer FMV reports for grants and exercises and address historic valuation exposure.
• Data-room pack: we assemble a clean, indexed ESOP data-room pack, so diligence is fast and the answers are ready.

All fees and charges listed are indicative only and do not constitute a binding offer. Final amounts may vary depending on the volume of work and the complexity involved.

Professional service charges for drafting, filing, and representation are separate from the statutory fees. The exact fee depends on the complexity of the case, disputed amount, and number of hearings required. Contact us for a detailed quote.

Get a free ESOP Due Diligence Prep consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

10,000+ Businesses | 4.9 Google Rating | 50,000+ Documents Processed | 15+ Years

Patron Accounting LLP is a CA and CS firm with 15+ years on ESOP compliance, ROC filings, valuations and deal-readiness for funding and M and A.

With offices in Pune, Mumbai, Delhi and Gurugram, Patron Accounting serves businesses across India, both in-person and remotely.

ESOP DD prep is the equity-specific complement to broader transaction review, and rests on our ESOP management and compliance services.

Remediation draws on our secretarial audit and statutory audit, allotments via issue of shares, and valuations via actuarial valuation services. See also ESOP valuation services, ESOP corporate filings and the full ESOP services hub.

Approval and filing: an ESOP scheme requires a special resolution under Section 62(1)(b), with MGT-14 filed within 30 days and PAS-3 on allotment after exercise; missing or late filings are the most common DD findings.

Register: Rule 12(10) requires the SH-6 register recording all grants, vesting, exercise, lapse and forfeiture, which must be available for inspection in diligence.

Valuation: a registered-valuer fair value is required at grant and at exercise, and past allotments without a Rule 11UA valuation can carry historic Section 56(2)(viib) exposure.

Remediation routes: late filings are regularised with the applicable late fees, and where needed condonation or compounding routes under the Companies Act address older defaults.

Authoritative sources: the Ministry of Corporate Affairs (Section 62, Rule 12, MGT-14, PAS-3, SH-6), the Companies Act, condonation and compounding provisions, and the Income Tax Department (Rule 11UA valuation, Section 56).

This is the one ESOP service where the clock is already running: the term sheet is signed, diligence is days or weeks away, and the gaps that took years to accumulate have to be fixed in that window. Every day of delay narrows the room to remediate cleanly and raises the chance that the investor finds the gap first, on their terms. The moment a round or a sale is on the horizon, get the ESOP records audited and fixed, so diligence confirms a clean house rather than uncovering a messy one.

ESOP gaps are silent until diligence, and then they are loud, costing valuation, time and sometimes the deal. Preparing in advance turns that risk into a non-event.

Patron Accounting LLP, a CA and CS firm with 15+ years of ESOP and deal-readiness experience, audits your scheme, filings, registers, valuations and cap table against what investors check, remediates every gap, and hands you a clean ESOP data room, so your funding round or acquisition closes on time and at the value you agreed.