Legal Due Diligence

Company structure, founder agreements, IP ownership, contracts, employment, litigation, regulatory exposure and cap table verification - explained for investors, not as legal advice.

What the documents actually say

Lessons

• First confirm the company you are investing in is the one that owns the business — Legal diligence starts with structure: where the company is incorporated, whether it is in good standing, which entity holds the customers, contracts and IP, and whether the shares being offered can be issued. (10 min)
• A founder who leaves without vesting can own a third of the company forever — Founder agreements, vesting and leaver provisions decide what happens when a founder departs. Diligence confirms they exist, are signed and would work as intended. (10 min)
• The company's name and inventions may already belong to someone else — Legal IP diligence checks registered rights such as trademarks and patents, and looks for claims by founders' former employers or universities over work the company relies on. (10 min)
• A few clauses in a few contracts can decide an exit — Legal diligence reviews the company's most important customer, supplier and partner contracts for clauses that transfer risk or restrict future options: change of control, exclusivity, most-favoured pricing, uncapped liability and easy termination. (11 min)
• The liabilities that are not on the balance sheet — Legal diligence looks for obligations the accounts may not show: workers who may legally be employees, pending or threatened litigation, and regulatory licences or rules the business depends on. (10 min)
• The cap table in the deck must match the legal records — Cap table verification reconciles the spreadsheet with the share register, board approvals, option grants and outstanding convertibles, so investors know exactly what they own after the round. (11 min)

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