Legal Service to Startups in India

Any legal setup working towards startup initiation and management must understand that typically, the increasing growth of the startups is relatable and dependent upon these three key factors. Firstly, ‘setting up a startup’ by bringing together a strong team of like-minded individuals having common credible concept or idea and forging such associating as an entity which can become the face of such ideas. Secondly, giving a ‘tangible shape’ and ‘commercially viable form’ to the conceived plot, thought, plan or idea of the team; and thirdly, selling the brain-child of the team to the purchasers which most of the times would include the both direct consumers and enterprise. An extended form of the economic strategy common to most of the startups taking shape in India would include realisation of funding and support from the Venture Capitalists which would assist in ensuring market sustainability and carrying capacity, better consumer recognition and deeper market penetration.

This incredibly exciting and fast paced journey of a startup is however pitted with legal obstacles and policy barriers. For an instance, the idea perceived by the startup initiator may appear to be unique and unheard of, but ultimately may patently ‘lack’ any distinctive character when juxtaposed with undertaking of an existing market player, giving rise to a potential dispute leading to a civil suit in a court of law; in any case, a cease and desist notice is inevitable. Similarly, the employees taken up by the startup may have entered into a ‘non-compete’ clause for which either the newly formed entity may be held liable; or there may be a case of innocent infringement of intellectual property owned by some other national entity.

Suffice it to say that no startup can prosper without the nuanced guidance, expert opinion and research backed advise to militate against the host of situations which are likely to spring out often. As a startup lawyer must realise the importance of sound legal assistance which every startup needs to mature into a strong market entity. It is in this regard, a lawyer should offer segmented legal advice to disentangle the legal complexities which are likely to be faced by most of the startups. A lawyer should be alive in providing early stage advise and support to entrepreneurs to cope up with the situations which may prop unannounced especially at times when financial resources are at their most scarce. Some of the common areas in which a lawyer may actively contribute to the startups may be enlisted as follows:

1.     Creating documents of incorporation:

The first step in starting up any venture needs papers related to incorporation. The entity may either be positioned as a partnership or a company depending upon the association of individuals and the human resource exploited by it.

2.     Legal Framework of Human Resource Management:

Engaging and managing relevant skill set based human resource is best managed by the originator of the idea himself. However, the law of the land requires the employer to list the right, liabilities, duties, and related working conditions incorporated in a legally binding contract. Besides this, there sometimes are restrictive or prescriptive covenants governing the movement of human resource from one entity to the other.

3.     Operational Conflicts and Legal Compliance:

A legal notice citing plagiarism or copyright infringement or a simple termination of tenancy notice or a communication indicating a malpractice may sometimes be sufficient to derail the progressive growth of a startup entity. Similarly, the member startup may come across a situation in which the idea, concept or the input put forth by it for development has been copied or replicated by the other with permit or credit. Such circumstances need the rights to be asserted and vindicated aggressively.

4.     Strategic Legal Advisory:

The great roman emperor Marcus Aurelius said in his Meditations “The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.” Lawyers would respectfully disagree!

Today, a least common multiple found in every startup enterprise is an ‘Original Idea’. And since the entire machinery set up is to give a commercially viable shape and form to this central idea, it is pressing to test the water of originality in the idea. The process requires painstaking research and reference of the publically available concepts and forms in circulation to decide upon the novelty factor of the idea.

5.     Strategic financial advisory and financial fraud protection:

Every commercial entity be it the matured enterprise or a nascent startup, needs strategic financial advisory. The instances of such an evet may include issuing bank guarantees, indemnity bonds, promissory notes, post-dated cheques and other instruments representing collateral security or value in terms of money.

6.     Intellectual Property Distribution and Licensing:

The management and licensing of the different forms of intellectual property can be important to the success of a startup that invents or creates a product, to manufacturers, to the designers that configure or refine a product’s appearance and to the producers of packaging and marketing literature and materials. Licensing the IP rights are extremely beneficial since the risk of production, manufacture and its promotion is passed to more than one entity. It generates continuous revenue, reduces cost and increases market penetration. Since licensing IP needs a format training and expertise in the subject, lawyers skilled in intellectual property and licensing should usually deal with the more complicated legal aspects of licensing.

Avijit Mukul Sharma

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