What a buyer checks when you sell your business

An acquisition goes deepest

A buyer takes on the company's past as well as its future, so the diligence covers everything an investor or a bank would, plus the liabilities that might surface after the deal: tax demands, employee dues, disputes, and promises made in old contracts.

Buying shares or buying the business

In a share purchase, the buyer buys the company itself, with all its history. In a business transfer, the buyer buys selected assets and contracts, and leaves some liabilities behind. The structure changes what the buyer worries about and what documents they need, and it has tax and stamp duty consequences your CA and lawyer should work through early.

What a buyer checks

Everything in the investor guide, and in addition:

• Liabilities: pending and past tax assessments, GST notices, contingent liabilities, guarantees given, and anything off the balance sheet.
• Related-party transactions: dealings with promoters or their other businesses, and whether they were approved.
• Employees: gratuity and leave liabilities, PF and ESI compliance, and key employees' willingness to stay.
• Contracts: change-of-control clauses that let a customer, supplier or lender walk away once the company changes hands.
• Assets: title to property, condition of plant, and ownership of IP.
• Working capital: what normal levels look like, because the price often adjusts for it at closing.

Disclosures

You tell the buyer about known problems through a disclosure letter against the warranties in the purchase agreement. What you disclose properly, you are generally not liable for later. What you leave out can become a claim. Keeping a list of known issues as you go makes the disclosure letter far easier to write.

Warranties, indemnities and escrow

Findings turn into protections for the buyer: warranties that certain things are true, indemnities for specific risks (often an identified tax exposure), part of the price held in escrow or deferred, or a lower price. The better the record, the fewer and smaller these protections tend to be.

Timeline

An acquisition usually takes longer than a raise, often several months from letter of intent to closing, depending on the size of the business, the number of approvals needed and how quickly the seller can produce its records.

See how due diligence works in India for the stages end to end.

Official sources

The rules this guide describes come from these. Check the current text there, or ask your CA or CS.

• Ministry of Corporate Affairs: company filings, charges and the Companies Act 2013
• Income Tax Department: the Income-tax Act 2025 and returns
• GST portal: registrations, returns and GSTR-9C
• Code on Social Security 2020: PF, ESI and gratuity thresholds
• IBBI: registered valuers