A PE fund was acquiring a majority stake in a D2C consumer brand that had been operating for five years. The fund's legal counsel issued a standard secretarial due diligence request: copies of all share allotment records, board resolutions, PAS-3 filings, and the register of members. What came back was a cap table spreadsheet, a few scattered board resolutions, and four years of unfiled PAS-3 forms. Closing was scheduled in six weeks.
PAS-3 (Return of Allotment) must be filed with the ROC within 15 days of each share allotment. Failure to file does not invalidate the allotment — but it means the ROC's records show a different share capital than the company's actual cap table, a discrepancy that surfaces in every professional due diligence.
What the Due Diligence Found
Counsel's review of the MCA portal against the company's own cap table identified 14 allotment events over five years where PAS-3 had either not been filed or had been filed late with incorrect data. In addition, two share transfers — both informal, between the founders and early employees — had been completed without formal instruments of transfer (Form SH-4), without stamp duty payment, and without board approval.
The gap between the MCA-recorded share capital and the actual cap table was significant: MCA showed 40,000 shares outstanding; the actual cap table showed 67,500. The difference — 27,500 shares — represented allotments for which no PAS-3 had ever been filed.
The Remediation Plan
Six weeks was tight. We mapped every allotment event against board resolutions, bank receipts, and the register of members to reconstruct the complete chronological sequence. The work fell into two tracks: PAS-3 remediation and share transfer documentation.
Track 1 — PAS-3 Remediation (14 Events)
Each of the 14 allotment events required a separate PAS-3 filing. For events where a board resolution did not exist or was defective, we worked with the company's founders and their legal counsel to reconstruct the record — using bank receipts, share certificates (where issued), and emails as contemporaneous evidence. Late additional fees under Section 403 were calculated and paid at the time of filing. All 14 PAS-3 forms were filed in sequence, in chronological order, ensuring the cumulative allotment record was internally consistent.
Track 2 — Share Transfer Documentation
The two informal transfers required retroactive documentation. Form SH-4 instruments of transfer were executed by the transferor and transferee in each case. Stamp duty was paid at current state rates on the market value of shares at the time of transfer (not original transfer price — the stamp authority assesses at current value). Board resolutions approving the transfers were passed and included in the board minutes register. Entries in the register of members were corrected to show the transfers.
Register of Members Reconciliation
With all PAS-3 filings completed and the two transfers documented, the register of members was fully reconciled to the actual cap table. The ROC records now matched — 67,500 shares outstanding, correctly distributed across the shareholder base.
Due Diligence Response Package
A complete secretarial due diligence file was compiled: certified copies of all PAS-3 filings (with filing acknowledgements), all board resolutions in chronological order, the reconciled register of members, share transfer documentation, and a narrative memo explaining the historical gaps and the remediation steps taken.
The Outcome
Result
- All 14 PAS-3 forms filed — MCA records now match actual cap table (67,500 shares)
- Late additional fees paid — no outstanding filing obligations flagged on MCA portal
- Two share transfers formally documented — SH-4, stamp duty, board resolutions, register updated
- Complete secretarial due diligence file delivered to PE fund counsel within 5 weeks
- Transaction closed on schedule — no price adjustment or deal delay attributable to secretarial gaps
What This Case Illustrates
- 01
PAS-3 is filed per allotment, not per year.
Many founders believe annual MCA compliance (MGT-7 and AOC-4) is the entire filing obligation. PAS-3 is event-triggered — filed within 15 days of each allotment. A company that raises capital in multiple tranches may have 8 to 12 PAS-3 filings in a single year, each with its own 15-day deadline.
- 02
Informal share transfers create chain-of-title risk.
A share transfer in India is not effective without a properly executed Form SH-4 (instrument of transfer), payment of stamp duty, board approval, and entry in the register of members. An informal transfer — a handshake agreement or an email — is not a legal transfer. Any subsequent acquisition or investment requires the chain of title to be clean.
- 03
MCA records are examined by every professional investor.
PE funds, VC firms, and their legal counsel compare the cap table provided by the company against the MCA filings. A discrepancy is not treated as an administrative oversight — it is a due diligence finding that requires explanation, remediation, and potentially a purchase price adjustment or an indemnity.
- 04
Remediation is always possible, but time is the constraint.
Every gap we encountered in this engagement had a legal remedy. The constraint was time — six weeks to file 14 PAS-3 forms, document two transfers, and compile a clean due diligence file. Starting remediation before the transaction was announced would have removed all time pressure. Engage a CS as soon as a potential transaction is on the horizon.