Building a Legal Toolkit

(Essential Resources Every Startup Needs)

Introduction:

The startup is an idea that has the capabilities to change the world around us, from food
delivery applications, facilitating ease of transportation through cabs to ease of payment and
the concept of Digital India, every initiative starts with two things an idea to change and to
the plan to execute such idea to bring around change. Start-up means to begin or start
something from scratch and to bring to life something that is only an idea that can change the
world around us. To protect any products or services that are either materialistic property or
that of intellectual origin the startups have the rights of ownership to their products and
services and also have the rights to protect such as well as protect the company or that of the
establishments from external and internal factors which may pose a threat to the existence
and the ownership of such companies and their legal rights. This toolkit aims towards
providing a 3600 overview of the legal aspects that any Startup would require and is
necessary for such companies to not only protect themselves from potential suits but also to
protect any products or ideas that the company may be formed upon or be a bi-product of any
such operations or techniques upon which such operations and their internal factors may be
based upon and to strengthen such companies from the beginning to build a stronger and
better future within the Laws. This editorial also attempts to provide a toolkit for individuals,
companies, and young professionals to understand the pavements that can lead to a better,
well-protected, and strong startup.

Required Documentation:

Any startup is a like new business, so the first and foremost requirement of any business to
start is to have the Certificate of Incorporation of the said business and if the said business
is in partnership, then it is required to have a Partnership Deed or Founder’s and Co-
Founder’s Agreement which shall include the names and addresses of the founders and co-
founders or partners and the nature of the partnership, either limited by shares or unlimited;
either limited liability or not, have to be provided and include factors such as remuneration or
salary, dispute resolution procedure, etc. Well in my point of view, it is always better that any
business holder of any startup should have the partnership deed made at the very first step
which will allow them to take the incorporation certificate of the said startup jointly because
 Building a Legal Toolkit
(Essential Resources Every Startup Needs)

a partnership is always like a marriage so if in any scenario where any such partner wishes to
get divorced the partnership can be dissolved and the split of the property hereby can be
easily done. The Certificate of Incorporation shall include the following:
1. The name of the business and abbreviations, if any.
2. A statement of purpose for the business.
3. The registered address of the business, corporate address, if any, and a registered
agent for the address.
4. The number of the shares of stocks that are authorized to be issued and details of the
different types of stocks that can be issued by the company if there are more than one
type.

The second very important element one must have is a Non-Disclosure Agreement (NDA),
it is a form of agreement that the startup or that business does with any person whoever shall
be working within the limits of the said business and may be exposed to the functionalities or
the production or that of vital information that in the development of any technological
equipment or products or that of services which are the basis of such startups to be formed
are protected from being stolen or sold to the competitors. NDA also provides insurance for
the information leakage if it happens which is borne by such individuals who are found in
violation of the terms of the NDA and it also provides that suits can be filed against such
individuals in such a scenario. The contents of an NDA should include the following:
1. Confidentiality Clause of the First Party
2. Handling of confidential documents and information
3. Ownership of such confidential documents and information
4. Obligatory Clause of the other party
5. Scope of confidential information or documents
6. Remedies in case of breach of confidentiality
7. Exceptions to certain disclosures
8. Period of Confidentiality
9. Dispute redressal clause
10. Place of suit

Shareholder’s Agreement is a vital documentation which is not only for the co-founders but
also for when the Investors come to the company. This vital document is a way to have a
 Building a Legal Toolkit
(Essential Resources Every Startup Needs)

better relationship that has been pre-determined and in cases where any co-founder decides to
leave or part with it also provides a way to determine the consideration at which shares held
by such person can be sold back to the company for predetermined consideration.
Employment Contract and Offer Letters are other vital document which for the purposes
mentions the employment of people to the company or the startup which is inclusive of the
NDA and also hold the information about contract and scope of employment the duties and
responsibilities of the individuals and include the consideration amount for the person entitled
towards during such course of employment.
One of the very vital documents that every startup should and must include is the Bylaws of
the company as it would enable them to ratify and bring new and retain or amend old
regulations by which every employee and the partners are entitled to follow.
Another vital legal tool every startup should have is the Intellectual Property (IP)
Agreement which allows the company to retain intellectual ownership over any materials or
documents that contribute towards the application of new technology or that bring to the table
a new solution to the problems the startup aims to resolve.
In the recent developments with the passing of the Data Privacy and Data Protection
(DPDP) Act, 2023, companies and startups should have their terms of usage and privacy
outlaid and should devise their policies in adherence to such and with the concept of ease of
doing business the startups also are required to provide with various ease of payment systems
where the DPDP Act provides the guidelines for such gateways towards the protection of
customer information and user data.
Amongst the various other documents, a startup should also have the various licenses that the
Startup might require to have depending upon the category or type of business to be held by
the startup. , a startup should also have Memorandums of Understanding (MoUs), these
documents help in fostering relationships with partners, vendors, and investors as these small
documents act like agreements that the startup does with its counterparties at various
instances may be during the initial or maybe in the future stages of its business growth.
 Building a Legal Toolkit
(Essential Resources Every Startup Needs)

DPIIT Startup Recognition –Must have a Checklist to be recognized under Startup

India Scheme of India:

 Age of Company < 10 years from Incorporation

 Company Type – Incorporated as Private Limited Company
Or
Registered Limited Liability Partnership
Or
Registered Partnership Firm
 Annual Turnover < ₹ 100 Cr.
 Should be original (Not reconstructed or formed out of separation of existing
business)
 Innovation and Scalability (Must have services or products under improvement to
bring innovation and must have high scalability to expand the generation of income
and employment)

Conclusion:

Every startup or business is just like a child that requires to be taken care of and moulded into
the best shape to grow stronger and become better than others. The editorial is not an
exhaustive analysis but provides an overview of the basic toolkit every startup must have
from the early stages and should have in the course of growth to provide more secure,
protected, and positive growth in the future. Every person who has their innovative idea into
execution becomes a parent of a child who requires your attention, hard work, protection, and
care, this editorial hopes to present an overview to every such parent and even to those who
dream to become one.