Seed Due Diligence: What the Investor's Lawyers Will Ask For

Between the term sheet and the money there is a spreadsheet. It arrives from the investor's lawyers within days of signing, it runs to somewhere between forty and a hundred numbered requests, and how a company responds to it does more to set the closing timetable than anything else in the round. Founders who see the list for the first time when it lands lose weeks. Founders who know what is on it — because the list is substantially the same on every seed deal into a Pakistani company — close on schedule. This briefing, current as of July 2026, reconstructs that list and explains what each category is actually testing. For the round mechanics around it, see our reference on seed rounds; for how we run this process from either side of the table, see our due diligence practice.

Why the list looks the way it does

Seed diligence is not an audit. The investor's lawyers are answering three questions. Does the company legally exist in the shape the founders described — the shares, the assets, the people? Can it lawfully issue the new shares — which in Pakistan pulls in the Companies Act, 2017 machinery and, for foreign money, the Foreign Exchange Regulation Act, 1947? And is there anything in the record that becomes the investor's problem after the wire — undocumented promises of equity, unowned code, an old raise that strayed near the public-offer line under the Securities Act, 2015? Every request on the list serves one of those three questions. Understanding which one turns a bewildering demand into an answerable one.

The request list, category by category

Category	Typical requests	What it is testing
Corporate and constitutional	Certificate of incorporation; memorandum and articles as currently in force; statutory registers; board and general-meeting minutes; SECP filing history including annual returns and officer particulars	That the company exists, its constitution matches the deal, and Companies Act, 2017 housekeeping is real
Share capital and cap table	Register of members; all allotment returns filed with the SECP; share certificates; every SAFE, note, ESOP promise, advisor letter, or side agreement touching equity	That the cap table on the pitch deck matches the statutory record, and that no hidden claimant converts later
Prior fundraising	Documents for every earlier cheque, however informal; evidence of how widely earlier offers were made; banking records of investment receipts	Compliance with the private placement boundary under the Securities Act, 2015 and its rules, and clean entry of earlier money
Foreign exchange	For any past foreign investor: remittance evidence through the banking channel, proceeds certificates, reporting to the State Bank through the authorised dealer	That earlier foreign money entered in a way the Foreign Exchange Regulation Act, 1947 framework recognises — because defects here infect the new investor's own repatriation position
Intellectual property	Written assignments from every founder, employee, and contractor who touched the product; trademark and other registrations or applications; open-source usage; domain and account ownership	That the company, not the people, owns the product — assignment being a creature of contract and the IP statutes, not of employment by itself [WORK-FOR-HIRE DEFAULTS UNDER THE COPYRIGHT ORDINANCE, 1962 — TO BE VERIFIED BY REVIEWING LAWYER]
Employment	Contracts for all staff; contractor agreements; EOBI and provincial social security registration; any disputes or terminations	Exposure under the Employees' Old-Age Benefits Act, 1976 and provincial labour statutes, and whether key people are actually locked in
Material contracts	Top customer and supplier agreements; anything with exclusivity, change-of-control, or termination-for-convenience clauses	Whether the revenue survives the round and an eventual exit
Tax	NTN and sales tax registrations; returns filed; withholding compliance on salaries, rent, and services	Undisclosed liability under the Income Tax Ordinance, 2001 and sales tax law that would otherwise arrive after closing with penalties attached
Licences and regulatory	Sector-specific approvals — payments, lending, health, education as applicable	That the business model is lawful, not merely unchallenged so far
Litigation and disputes	Pending or threatened claims, demand notices, regulator correspondence	The tail risk the warranties will otherwise have to carry

The categories that decide the timetable

Three categories generate most of the delay, and they are predictable. The first is share capital. On the pitch deck the cap table is a clean grid; in the statutory record it is a sequence of allotments, returns, and register entries under the Companies Act, 2017, and the two frequently disagree — an allotment return filed late or not at all, certificates never issued, a co-founder who left with shares still registered in their name. The investor's lawyers will reconcile deck against register line by line, because their client is buying a percentage of whatever the register actually says.

The second is the shadow cap table: instruments and promises that are not shares yet. Every SAFE, every note, every "we agreed he gets two percent" email is a future claim on the same equity the new investor is buying. Expect the request list to ask, in terms, for anything that could ever convert into shares — and expect the closing to be conditioned on cleaning up whatever surfaces.

The third is intellectual property. Pakistani seed companies are routinely built on code written by founders before incorporation, by freelancers paid through personal accounts, or by contractors with no written terms. None of that vests ownership in the company by magic. The fix is a set of confirmatory assignments under the Contract Act, 1872 executed before closing — cheap now, genuinely difficult once a departed contractor realises the company needs their signature.

Foreign money makes the list longer

If the incoming investor is foreign, or any earlier one was, a further layer applies and it is unforgiving of history. New foreign money must enter through the banking channel and be reported in the way the Foreign Exchange Regulation Act, 1947 and the State Bank's Foreign Exchange Manual require, so the lawyers will ask about the company's authorised dealer relationship and its readiness to complete the reporting after allotment [CURRENT PROCEDURE AND TIMELINES — TO BE VERIFIED BY REVIEWING LAWYER]. Old foreign money is examined even more closely: a prior remittance that bypassed the channel — the classic case is a transfer into a founder's personal account, converted informally — cannot simply be papered over, and the incoming investor's lawyers care because defects in the register's history cloud everyone's exit. Companies with any cross-border history should pre-package this evidence: remittance advices, encashment certificates, and the reporting trail, deal by deal.

How to be ready in the two weeks you have

The efficient response to a diligence list is not to answer it — it is to have answered it before it arrived. A seed-stage data room is a modest thing: one folder per category above, populated with the actual documents, with a one-page disclosure note flagging known gaps honestly. The honesty matters tactically. Diligence findings that the company disclosed itself become closing conditions and tidy-up covenants; findings the lawyers unearthed become price chips and warranty demands. The single highest-value preparation step is a self-run reconciliation of the cap table against the SECP record, because it converts the most dangerous category of surprise into a known task.

Assume also that the answers will be warranted. The long-form documents will contain statements that the diligence responses were true and complete, so every answer given casually in a spreadsheet becomes, at closing, a promise with consequences under the Contract Act, 1872. Founders should review the final data room with that in mind: it is not correspondence, it is the disclosure against which their warranties will be measured.

What this means for you

Build the data room before the term sheet, not after — the list above is knowable in advance, and every item you assemble early is a week you do not lose later. Reconcile your cap table against the SECP record now, and paper every equity promise, however informal, before someone else finds it. Get confirmatory IP assignments signed while everyone is still friendly. If foreign money has ever touched the company, assemble the banking-channel evidence as a standing file. And treat your diligence answers as the warranties they will become. The companies that close on time are not the ones with no problems; they are the ones that found their problems first.