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Startup Mistakes

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ADITYA PANDEY
ADITYA PANDEY

This document outlines 8 mistakes that start-ups should avoid in order to prevent legal battles. It recommends having legally binding founder agreements, complying with all legal and government requirements, establishing robust customer service and dispute resolution systems, making timely vendor payments, securing intellectual property, properly documenting employment terms, implementing terms of use and privacy policies for websites and apps, and hiring experienced legal counsel. The document provides contact information for a law firm that can help start-ups avoid legal problems.

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MISTAKES THAT A START-UP SHOULD AVOID A booming outpour of Start-Ups in India is the recent trendsetter. Recently, we have witnessed many low and high profile Start-Ups landing up in the Court of law fighting legal battles and sabotaging their reputation publicly. In order to avoid such mistakes, here are “8 quick tips” that a Start-Up must do to avoid such ugly legal battles. 1. TO HAVE A STRONG LEGALLY BINDING AGREEMENT: One of the major concerns that a Start-Up should look into is the Founders’ Agreement. One should in a way think of the Founders’ Agreement as a form of “pre-nuptial agreement”. It should be clear, comprehensive, unambiguous agreement between the Founders of the Start-Up in order to cut down the chances of litigation. 2. TO ABIDE WITH COMPLIANCES: A successful Start-Up should have a good, vigilant and knowledgeable team of Advocates, Company Secretaries and Chartered Accountants in order to comply with all the Legal and Government compliances, to avoid litigation by the Government, Income Tax, ED, EOW, etc. 3. TO HAVE A ROBUST CUSTOMER REDRESSAL SYSTEM: Treat your Consumers/customers with utmost importance and care by providing them good services/products. This would decrease the chances of the consumer/customer to approach the Consumer Forum for redressal. 4. TO MAKE TIMELY PAYMENTS TO VENDORS: One should make sure you pay your vendors on time failing which the vendor would opt and approach the Court of Law for recovery of debts. 5. TO HAVE SECURE IP (Intellectual Property) POLICY: All the Intellectual Property like Copyright, Trade Mark, Designs, Patents should be registered and should be specifically registered in the name of the Company/Founders and not on the name of the employee.
6. LACK OF EMPLOYEE DOCUMENTATION: Make sure that the documentation with the employees are done properly. Business Start-Ups often encounter problems when they do not maintain adequate employment documentation. Consequently, Start-Ups should prepare a core group of employment documents to be signed by most, if not all, employees such as Employees Handbook, Offer letter, Confidential Information, Non – Disclosure Agreement etc. 7. NOT HAVING A GOOD TERMS OF USE AGREEMENT AND PRIVACY POLICY FOR YOUR WEBSITE/MOBILE APP: A Terms of Use Agreement sets forth the terms and conditions for people using your Website/Mobile App. Your Privacy Policy is a legal statement on your website/mobile app. setting forth what you will do with the personal data collected from users and customers/consumers of the site/mobile app., and how such data may be used, sold, or released to third parties. 8. NOT HAVING THE RIGHT LEGAL COUNSEL: In a misguided effort to save on expenses, Start-up businesses often hire inexperienced legal counsel. Rather than spending the money to hire competent legal counsel, founders often hire lawyers who are friends, relatives or others who offer steep fee discounts. In doing so, the founders deny themselves the advice of experienced legal counsel who can help the founders in avoiding many legal problems. For more details, contact us at: E-mail: updates@knppartners.com Tel: 011 – 41077755 Mobile: 9871555311

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Startup Mistakes

  • 1. MISTAKES THAT A START-UP SHOULD AVOID A booming outpour of Start-Ups in India is the recent trendsetter. Recently, we have witnessed many low and high profile Start-Ups landing up in the Court of law fighting legal battles and sabotaging their reputation publicly. In order to avoid such mistakes, here are “8 quick tips” that a Start-Up must do to avoid such ugly legal battles. 1. TO HAVE A STRONG LEGALLY BINDING AGREEMENT: One of the major concerns that a Start-Up should look into is the Founders’ Agreement. One should in a way think of the Founders’ Agreement as a form of “pre-nuptial agreement”. It should be clear, comprehensive, unambiguous agreement between the Founders of the Start-Up in order to cut down the chances of litigation. 2. TO ABIDE WITH COMPLIANCES: A successful Start-Up should have a good, vigilant and knowledgeable team of Advocates, Company Secretaries and Chartered Accountants in order to comply with all the Legal and Government compliances, to avoid litigation by the Government, Income Tax, ED, EOW, etc. 3. TO HAVE A ROBUST CUSTOMER REDRESSAL SYSTEM: Treat your Consumers/customers with utmost importance and care by providing them good services/products. This would decrease the chances of the consumer/customer to approach the Consumer Forum for redressal. 4. TO MAKE TIMELY PAYMENTS TO VENDORS: One should make sure you pay your vendors on time failing which the vendor would opt and approach the Court of Law for recovery of debts. 5. TO HAVE SECURE IP (Intellectual Property) POLICY: All the Intellectual Property like Copyright, Trade Mark, Designs, Patents should be registered and should be specifically registered in the name of the Company/Founders and not on the name of the employee.
  • 2. 6. LACK OF EMPLOYEE DOCUMENTATION: Make sure that the documentation with the employees are done properly. Business Start-Ups often encounter problems when they do not maintain adequate employment documentation. Consequently, Start-Ups should prepare a core group of employment documents to be signed by most, if not all, employees such as Employees Handbook, Offer letter, Confidential Information, Non – Disclosure Agreement etc. 7. NOT HAVING A GOOD TERMS OF USE AGREEMENT AND PRIVACY POLICY FOR YOUR WEBSITE/MOBILE APP: A Terms of Use Agreement sets forth the terms and conditions for people using your Website/Mobile App. Your Privacy Policy is a legal statement on your website/mobile app. setting forth what you will do with the personal data collected from users and customers/consumers of the site/mobile app., and how such data may be used, sold, or released to third parties. 8. NOT HAVING THE RIGHT LEGAL COUNSEL: In a misguided effort to save on expenses, Start-up businesses often hire inexperienced legal counsel. Rather than spending the money to hire competent legal counsel, founders often hire lawyers who are friends, relatives or others who offer steep fee discounts. In doing so, the founders deny themselves the advice of experienced legal counsel who can help the founders in avoiding many legal problems. For more details, contact us at: E-mail: updates@knppartners.com Tel: 011 – 41077755 Mobile: 9871555311