Due diligence is the prior review that checks the real status of a company or an asset before closing a transaction: buying, investing or issuing securities. In an issuance it covers three areas: corporate, asset and regulatory. Its outcome conditions the design of the offer and the documentation the investor will see.
Issuers tend to see it as a toll. It is the opposite. Problems that due diligence uncovers in time are corrected with a shareholders' meeting resolution or a registry extract; those that appear once the issuance is underway make it more expensive or stop it.
What due diligence for an issuance reviews
In a securities issuance, tokenized or not, the review is organized into three blocks. Each block produces documentation that then feeds the prospectus or the offer information document and the entry in the register.
| Block | What it checks | What it produces |
|---|---|---|
| Corporate | Issuer capacity, articles of association, shareholders' meeting and board resolutions, powers of attorney, pending litigation | Valid issuance resolutions and evidenced corporate status |
| Asset | Ownership, charges and encumbrances, appraisals, contracts supporting the cash flows, insurance | Documentary support for the asset value and its cash flows |
| Regulatory | Classification of the token as a financial instrument, prospectus threshold, registration regime, sector rules for the asset | Regulatory map of the issuance and its obligations |
Order matters. The classification of the instrument comes first, because it determines the entire framework of the transaction. The reference for that analysis is the ESMA guidelines on classifying crypto-assets as financial instruments (ESMA75-453128700-1323).
The scope is agreed before starting and is scaled to the size of the offer. A two-million issuance does not support the same review budget as a twenty-million one, but there are minimums that are not cut: ownership of the asset, validity of corporate resolutions and classification of the instrument. The rest can be scaled; those three cannot.
The regulatory block when the issuance is tokenized
If the token incorporates share, bond or participation rights, it is a financial instrument and follows the securities framework: LMVSI, MiFID II and Prospectus Regulation. MiCA does not apply to these tokens (Ley 6/2023; MiFID II; Regulation (EU) 2023/1114, art. 2.4).
Regulatory due diligence settles three questions. Whether a prospectus approved by the CNMV is required or the offer is exempt by amount, which we explain in what the CNMV prospectus is (Regulation (EU) 2017/1129). Which ERIR, the digital notary of the registry, will keep the record of the securities (RD 814/2023). And what sectoral regulations the asset brings with it: a development brings urban planning; a solar plant, its energy regulation.
Who does it and when to start
It is carried out by law firms and auditors independent of the issuer; each block usually has its specialist. The issuer normally pays for it, because its result forms part of the offer documentation. The ERIR also reviews the issuance documentation before recording it in its register, so a weak due diligence is detected late and in the worst place.
The issuer speeds up the work if it prepares an orderly data room: deeds, powers of attorney, accounts, contracts and appraisals in a single repository, with controlled versions. Every document the reviewer has to request twice lengthens the timeline and increases the bill.
The right time is before designing the offer, not after. A review that arrives when the amount, the timeline and the investors are already committed can only confirm decisions or overturn them; it can no longer improve them. The sensible thing is to commission it in parallel with structuring, as the first step in the process we describe in how to issue a security token in Spain.
Relationship with tokenization: the registry does not fix defects of origin
Recording on blockchain gives traceability and permanence to what is registered. That works in favor of the clean issuer and against the careless one: a title defect or an invalid corporate resolution do not disappear when tokenizing, they become part of a registry designed to last. Due diligence is the filter that prevents registering the problem.
The closing criterion is simple. If the asset or the company has a known defect, resolving it before issuing costs less than managing it later with investors on board. The issuer's remaining ongoing obligations are in regulatory compliance.
Are you preparing an issuance and want to know what documentation they will ask you for? Take the issuance diagnostic (2 min) or request a proposal. If you prefer to start by reading, download the 2026 guide.
This content is informative and educational. It does not constitute legal, tax, or investment advice. Check the current version of each regulation in the BOE and on EUR-Lex.
HokenFi is a software and infrastructure provider; it does not provide regulated services (CASP, ESI, EAF, or ERIR). This article is informative and does not constitute financial or legal advice.
Frequently asked questions
What is due diligence?
It is the prior review that verifies the actual state of a company or an asset before closing a transaction: a purchase, an investment or a securities issuance. It is carried out by law firms and independent auditors, and its result conditions the price, the guarantees and the design of the transaction.
What does the due diligence of a security token issuance review?
Three blocks. The corporate one: that the issuer exists, can issue and has valid resolutions. The asset one: ownership, encumbrances, appraisals and contracts that support the cash flows. The regulatory one: the classification of the token as a financial instrument, the prospectus threshold, registration with an ERIR and the asset's sectoral regulation.
Who carries out due diligence and who pays for it?
It is carried out by law firms and auditors independent of the issuer, each block with its own specialist. In an issuance, the issuer normally pays for it, because the result is part of the offer documentation. The ERIR also reviews the issuance documentation before recording the securities in its registry.
