5 must have LEGAL COMPLIANCES for every Indian Start-Up

April 9, 2016 1:30 pm | Published by | Leave your thoughts

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It is true – A ‘startup’ is all about taking risks.

However, when it comes to legal compliances and issues in respect of any venture precaution is always better than cure. Legal disputes may crop up anytime inside the venture or outside i.e., with clients/ customers etc., It is also true that having 100% legal issues free venture is also impossible. But safeguarding the interest of the individual as well as the venture is the most important aspect which has to be taken care of in the beginning itself.

Startups try to avoid consulting lawyers and try to save money by using the drafts and materials available on the internet. But most of these startups suffer at a later date due to the default clauses or contents of their agreements which will in no way support or safeguard their interest. Such materials will always be unconnected to the objectives of the startups.

Customizing legal documents on a daily basis by employing a lawyer will not be possible for a startup atleast at their initial stages until it generates handsome revenue. However, if you look at the larger picture, costs aggravate much more when legal issues start cropping up. Even if you have met a Chartered Accountant and Company Sectary for deciding on the kind of entity or venture you want to start with and for legal compliances on registrations, tax related issues and also deciding on the name and registering the same under the IP laws, you need to follow these tips and emphasize as much on the legal matters as that on other factors for stability and exceptional growth of any business:

RENT / LEASE AGREEMENT FOR THE PREMISES:

To start with an entity having suitable premises is the first step. However, usually people ignore its importance and invest substantial money on interiors and setting up of their entity without making a legally valid document of rent / lease. And very soon suffer when they are bombed with notice to vacate the premises even before one year from the date of setting up of the entity. Lease Agreements for commercial premises should compulsorily be for a duration of minimum five (5) years and the deed has to be registered in the jurisdictional Sub Registrars office. This will help you save more money on changing/ shifting the office premises very often and also safeguards your interest even before the court.

COMPULSORY AGREEMENTS WITH CUSTOMERS/ CLIENTS:

No person will start an entity without having a single client/ customer in hand. It is always advisable to have a proper, valid and legally enforceable agreement with the customer enumerating all the objectives, interests, roles, responsibilities, duties of both parties throughout and even after the term of such agreement. It is always advisable to get each and every such agreement drafted/ vetted by a lawyer before executing the same so as to ensure that your entity’s interest is always protected.

EMPLOYMENT AGREEMENTS:

Retaining employees after investing huge money on their trainings is another big task for every entity. It is always advisable to have employment agreement with stringent clauses with every employee ensuring that you retain them in your entity for a minimum of two to three years after investing on their trainings and development. There are several instances wherein the employee has been directed to repay to the Company the cost incurred on their trainings for resigning from the Company without contributing as assured.

NON DISCLOSURE AGREEMENTS

It is very much necessary for every entity to sign an NDA (Non Disclosure Agreement) with every client/ customer with whom they work from time to time as well as with every employee. It helps in safeguarding the data shared by the client with the Company and/ or with the employees. In the event of the client or the employee misusing of the said data of the Company then such agreements help the Company take stringent action against such client and/ or employee under the criminal and the civil laws.

RECOVERY ACTIONS:

Money recovery has always been a problem for every entity. But most of the entities hesitate to initiate legal actions against the client/ customer fearing that they would have to spend more time and money on the court and lawyers. It is always advisable to follow up on every client/ customer for payment of every bill be it small or big. Recovery proceedings before the court are much easier and courts have framed stringent rules to decide money recovery cases faster. Also, many times entities fail to take recovery action within the prescribed time frame and hence lose their money.

If you do not want to get trapped in the legal pitfall then following these tips before the issues arise will definitely help you triumph in your entrepreneurial journey!!

manasa Graduating with a BA LLB from University Law College, Bangalore I joined M/s Just Law Advocates and practiced under the guidance of Senior Counsel Mr. SS Naganand soon after successfully accomplishing my course in the year 2008 and worked there for about three years. Later being a Partner at M/s H’n’C Legal Advocates I focus on litigation in the Karnataka High Court and the Trial Courts at Bangalore and on Corporate. I have been in the panel of advocates of several startups and midsized organizations and have been regularly providing services on matters related to Contracts, Company Law, Litigations, Property and Inheritance, Enforcement of Agreements etc.,

 

MANASA JAYARAM

Partner – H’n’C Legal Advocates

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