Company Investment Due Diligence

How to prepare your company for investment due diligence

Preparing a company for investment due diligence is essentially about getting your house in order before investors start asking questions. The goal is to demonstrate that the business is well-organised, legally sound, and investment-ready – reducing friction and protecting valuation.

Here are the key areas to work through:

Corporate Structure and Governance

Confirm the company’s register at Companies House is accurate and up to date – registered office, directors, PSC register, confirmation statements.
Ensure the cap table is clean and accurate: shares issued, any options or warrants, vesting schedules, and any outstanding loan notes or convertibles.
Locate and organise all constitutional documents: certificate of incorporation, articles of association, and any shareholders’ agreement.
Resolve any outstanding board or shareholder approvals and ensure minutes are properly recorded.
Check that director loan accounts are documented and compliant.

Intellectual Property

Audit all IP: patents, trade marks, copyright, database rights, domain names, and software.
Confirm the company owns its IP – not founders personally. Assignment agreements from founders, employees, and contractors are critical.
Verify IP registrations are in the company’s name and that renewals are current.
Review any licences in and out, open-source usage, and potential third-party IP exposure.

Commercial Contracts

Compile all material contracts: customer agreements, supplier contracts, partnership agreements, and NDAs.
Flag any change-of-control provisions – investors will look for clauses that could terminate or modify agreements on a funding round.
Check for exclusivity, assignment restrictions, or unusual termination rights.
Ensure contracts are signed by all parties to them, not just presentable in draft.

Employment and People

Confirm all employees and contractors have written agreements in place.
Check IP assignment and confidentiality clauses in employment and contractor agreements.
Review any non-competes and non-solicitation obligations – especially for key personnel.
Identify any equity or option arrangements and ensure they are properly documented (for example, EMI scheme compliance).
Check there are no outstanding employment disputes or grievances.

Financial Records

Ensure both statutory accounts (filed at Companies House) and up-to-date management accounts are in order – investors will want to see both, and management accounts are often the first thing requested.
Resolve any HMRC correspondence or outstanding tax positions, including VAT, PAYE, and corporation tax.
Document any shareholder loans, director loans, or related-party transactions clearly.
Have a clear picture of the company’s cash position, burn rate, and revenue pipeline.

Data Protection and Regulatory Compliance

Confirm ICO registration is current.
Ensure privacy notices, data processing records (Record of Processing Activities), and any data processing agreements are in place.
If the business handles personal data at scale or in sensitive sectors, prepare a summary of the data protection framework.
Check sector-specific regulatory compliance – for example, FCA authorisation, MHRA, or CQC, where relevant.

Litigation and Disputes

Identify and disclose any material ongoing, threatened, or pending litigation, disputes, regulatory investigations, or enforcement actions.
For resolved matters, focus on the last three years (or five years for larger transactions or deals involving warranty and indemnity insurance), disclosing only those above a proportionate materiality threshold or involving regulatory or employment matters.
For emerging and SME companies raising growth capital, a three-year lookback and a proportionate materiality threshold is the right starting point – with all regulatory matters disclosed unconditionally.

Technology and AI

This section is relevant for technology companies, AI-driven businesses, and other companies for which technology or AI assets form a material part of the business – to the extent not already covered under the Intellectual Property, Commercial Contracts, or Data Protection sections above.

Confirm ownership of proprietary technology and AI models – including any assets developed by founders, employees, or contractors before or outside formal employment arrangements.
Document training data provenance: where the data came from, what rights the company has to use it, and whether any licences or consents are in place.
Identify and review open-source dependencies – including the licences governing each component and any obligations that attach to use or distribution (for example, copyleft requirements).
Assess cybersecurity posture: review IT security policies, access controls, penetration testing history, and any incident records.
Where the company operates or is developing AI systems, identify any regulatory exposure -including under the EU AI Act for companies with EU operations or customers, and any applicable UK sector-specific guidance on AI use.

Practical Organisation

Create a secure virtual data room – investors expect documents to be organised, searchable, and accessible.
Structure folders logically: Corporate | IP | Contracts | Employment | Finance | Compliance | Litigation.
Where the investment involves representations and warranties, prepare a disclosure letter and disclosure bundle.
Brief key management on the process so they can respond to management questionnaires promptly.

The best due diligence preparation is not a last-minute exercise – it is ongoing legal hygiene.

Companies that can produce a clean, well-organised data room quickly signal to investors that the business is professionally run, which directly supports valuation and deal confidence.