Due Diligence checklist: investment (start up)
Legal due diligence checklist for an investment in a start-up company, for a company which has not commenced trading or has only traded for a limited period.
Read more
When do I use this document?
- for the legal due diligence for an investment transaction
- where the subject company is a start-up company or has a limited trading history
- as initial requests for the company to answer and provide supporting documents
What are the key features?
- requests in tabular form, with the company’s answers to be inserted in the table
- requests covering 10 key subject areas, including:
- corporate
- contracts
- litigation and compliance
- assets
- intellectual property
- commercial property
- employees
- finance and insurance
- taxation
- business plan/forecasts
What else do I need to know?
In evaluating a start-up company, investors typically focus on:
- share capital: verifying the number of issued shares and shares reserved or granted as share options
- funding: understanding how the company has been financed, including loans from the founders or family members which may need to be converted to equity
- founder service contracts: investigating whether the founder(s) have service contracts, committing them to the business and including post-termination restrictive covenants and intellectual property protections
- intellectual property: checking that externally developed intellectual property is owned by the company
- business plan and projections: scrutinising the preparation and basis of the company’s business plan, forecasts and projections
When do I use this document?
- for the shareholders agreement between multiple investors and the founders
- where the investment is being documented in a separate subscription agreement
- for a private limited company incorporated in England and Wales
- in conjunction with a Subscription Agreement and new Articles of Association
- for Paper Rock’s associated Subscription Agreement and Articles of Association, see
What are the key features?
- full form shareholders agreement
- 27 clauses and 4 schedules over 30 pages
- investor rights: exercisable by a majority of the investors
- directors:
- investor director: investors’ entitlement to appoint a director
- other directors: the founder shareholder(s) rights to appoint a director
- board proceedings: how proceedings of the board will be conducted
- information rights: rights to information for the investors and other shareholders about the company and its finances
- future share issues: pre-emption rights on the issue of new shares
- share transfers: rules governing the transfer of shares, including:
- pre-emption rights on share transfers
- compulsory transfer events, including founder good and bad leaver clauses
- tag-along and drag-along rights
- reserved matters: matters requiring prior approval from the investors (acting by investor majority) and other shareholders
- restrictive covenants: restrictions on the founders from competing with the company and soliciting the company’s customers, suppliers and employees
What other documents are available?
For a combined Investment & Shareholders Agreement for an established business with multiple investors, see
For a standalone Shareholders Agreement for an established business with a single investor, see
For standalone Shareholders Agreements for start-up business, see
Related Articles
£15.00 exc VAT
Updated by a lawyer on 21/07/2025
- Updated By a lawyer on
- Guidance notes included
- No hidden extras
- Easily customisable
Create your document in 3 Easy Steps
- Download
- Customise
- Share & Sign
PaperRock offers affordable, legal document templates, written by experienced and expert lawyers, trusted by businesses across the UK and beyond. No hidden charges or trial sign-ups are required to complete your document.
“I have worked in legal and business affairs for over 25 years and need access to a wide range of corporate and commercial legal precedents. Paperrock is a refreshing source of high-quality legal templates. Superb value for money.”
Amanda | Bannister Creative
£15.00 exc VAT
- Written by expert lawyers
- Quick to download
- Easy to customise
- No hidden extras
- free re-downloads
“It’s hard to find legal documents on the internet you can really trust. Knowing an expert lawyer has drafted what I need, gives my business the edge and gives me peace of mind.”
Elle, Founder | Winslow skincare & aesthetics.
“As an SME Paperrock saves us the legal fees we’ve previously had to spend. In these challenging times that's a big help. Great products and support.”
Giles, MD | Boniti Ltd.
