START-UP
A start-up company is a freshly created business entity formed by one or more entrepreneurs with the goal of developing and bringing a new product to market. It is an entrepreneurial enterprise with the goal of fast expanding as a consequence of providing services or products to a certain market segment.
According to the most recent update, the Department of Promotion of Industry and Internal Trade (DPIIT) has issued a gazette notification that broadens the definition of a start-up from the previous definition under the ‘Start-Up India, Stand-Up India’ scheme, allowing an entity to be considered a start-up for a period of up to ten years from the date of incorporation/registration, rather than the current period of seven years.
If an entity’s turnover hasn’t exceeded Rs 100 crore in any of the financial years since its incorporation/registration, it would be deemed a Start-Up, rather than the present Rs 25 crore.
WHAT ARE THE LEGAL CONCERNS FOR START-UPS?
The law has a significant influence on both established businesses and new businesses. Even with a basic awareness of legal elements, there are unforeseeable traps and challenges that new and young businesses are unable to anticipate, and these issues can grow more forceful and represent severe risks to new businesses, culminating in the loss of a solid business. We’ll go over the primary challenges that start-ups face:
NO AGREEMENT BY THE FOUNDERS
A founders agreement specifies the role of the founders as well as the terms and circumstances to which they must conform. This outlines each Company founder’s role, responsibilities, and liabilities. A founders’ agreement establishes a foundation for future co-founder relationships, how a firm is formed, and what each owner contributes to the table that isn’t addressed by the Company’s operating agreements. In the absence of this agreement, the founders will be mismanaged.
Non-disclosure agreements (NDAs) — Non-disclosure agreements (NDAs) put an obligation on the parties that they will not divulge any confidential information or concept of the company to anybody outside the firm. The NDA agreement should explicitly spell out the ramifications of a breach of the NDA. To secure their ideas, start-ups should enter into a confidentiality agreement with their workers, co-founders, or anybody else who has access to private information or ideas.
Contracts of Employment – While hiring, a start-up should acquire an offer letter signed with its employee because hiring someone without a suitable agreement might lead to conflicts about working hours, compensation, and other issues. The employment contract must include all required instructions and information on work, such as office hours, salary, job title, super authority, and terms and conditions for termination of employment.
Protection of intellectual property rights is required-
Intellectual property rights are the lifeblood of any new business. Many start-ups are concerned that their concept or strategy may be stolen, thus it is critical for them to secure their intellectual property rights as soon as possible. The other concern is that the start-up should double-check that what they want to accomplish or sell has already been protected. So that they don’t run into issues like trademark infringement or other IP breaches after investing a significant number of money in their company.
Intellectual property rights protection requirements may range from one start-up to the next.
Patents — Patents are a type of intellectual property that start-ups should attempt to preserve if a start-up is working on a technological item or a technical method of accomplishing a task, it should file for a product or process patent. The patent right is a negative right that allows the patent owner to commercialize his invention exclusively and prevents others from doing so. Once a patent is registered, the owner can use it exclusively for a period of 20 years; however, if he fails to register his invention, anyone else can replicate his concept, resulting in a detrimental impact on the inventor’s firm in terms of profit and goodwill.
Copyright — The start-up can get a copyright for its software program, periodicals, articles, study, or concept expressed on paper, as well as other literary or artistic work. It will prohibit others from utilizing the creator’s creation for the duration of the creator’s life and for 60 years after his death.
Trademark/ Servicemark – When deciding on a trademark, start-ups should keep in mind that their trademarks or tradenames should be easy to pronounce, attractive, and distinctive. The international implications of the marks should also be considered. They should search for the mark they want on the IP India website or simply do a google search.
Liabilities for Torts
Tortious responsibilities might emerge when someone does anything that is illegal or when he fails to do something that is required by law. If a start-up is not careful with its actions, it may risk tort liability. The tortious liabilities that may arise are as follows:
Strict Liability – This is a legal term that refers to a situation in the historic Rayland v Fletcher case, in which Ryland hired workmen to create a reservoir on his land, where they discovered a disused mineshaft and neglected to shut it, causing flooding in the nearby mines and causing a large loss, gave rise to the strict responsibility rule. Rayland was found to be strictly accountable by the court.
Start-ups should be cautious while handling and managing raw materials, noise, fire, vibrations, and odors, among other things.
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For any type of assistance feel free to contact us or reach us at: – MG Associates (Company Secretaries)- CS Manisha Mittal – 70152-77705
I have done my best to provide all the specifics, but please accept my apologies if any of the information supplied is incorrect. Please feel free to comment, interact, and propose topics for future posts.
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