Start-ups are small growing companies founded by one or more entrepreneurs, they are at their initial stage of operation with a limited amount of capital and limited experience. The government of India has taken several initiatives to encourage the growth of start-ups in order to promote entrepreneurship and employment by providing easier IPR facilitation, a favorable taxation system, and easier compliance for the setting-up company, etc., even then Start-ups in India have to deal with various obstacles like funding, insufficient skill, lack of marketing strategies, etc. over that start-ups have obligation to operate in compliance with laws and follow the ethical behavior. Non –compliance with laws or ethical misconduct may lend the start-ups to serious troubles like fines, punishments, revocation of licenses, litigation expenses, etc. which may cause an adverse effect on the limited capital of the start-ups. Currently, the whole world is witnessing a rise in startups. They are of great importance as they make various contributions to the country’s economy. India is witnessing a boost in the number of startups. Till September 2018, a total of 1200 new tech startups were added which included eight unicorns. According to the Economic Survey 2021 – 2022, this number has increased to 14,000. The government launches several schemes and programs to promote the growth of startups. The Budget 2022-23 allocates Rs 283.5 crore for the Startup India Seed Fund Scheme. Though these Startups are capable of attracting large investments, the majority of them face many problems during their operations.
Overwhelmed by the legal needs an entrepreneur needs to navigate as they try to get your startup off the ground? In the years that we have worked with startups and small businesses, and being a startup ourselves, we have seen how challenging building a business from scratch can be. We have worked with over 100 startups, and we see that legal frequently isn’t at the top of an entrepreneur’s mind. It is costly and there are often other more pressing needs that demand your attention. But legal is important nonetheless. This is why we launched Spinach Laws for Startups. Spinach Laws serves the services which allows entrepreneurs to manage their legal documentation reliably and affordably. It means less time spent on routine legal work and crucial cost savings for a startup raising early funds. Spinach Laws is the end-to-end platform for all the startups and smaller companies/ MSME for all their legal and compliance needs starting from incorporation to fundraising to compliances to policy making to documentation till the growth and maturity level of an entity. Today Spinach Laws is India’s only end-to-end platform for startups and smaller companies to create, negotiate, and sign both the simple, and complex contracts they need to run their business, with expert legal advice. Since our inception, we have helped more than 100 Startups close their fundraising, commercial contracts, run leaner HR teams, and enter new markets.
As her name signifies, Palak (not spinach, although she does spin laws and Nach/ dance on the tune of her work). She has been providing legal services for almost 5 years in the subject matter of Startup Legal Advisory, Fundraising, Strategy, Litigation, Corporate Advisory and Tech related framework. She knows Business laws in and out and has always been dedicated and updated on her understanding and application of latest regulations, laws and implications of ongoing legal problems. She uses this expertise to build and apply bespoke legal services to every level of the organisation’s operations. So let be her your legal advisor and rest easy knowing the business you have worked so hard to build is protected in every way possible. Following are the challenges that every startup faces:
1. The problem is determining the business structure: Many start-ups face problem in determining what is an ideal business structure for their start-up as the business structure may vary from business to business and one business structure could be good for one may be bad for the other in terms of risk, a number of people involved, sharing of profits, liability, taxation, annual meetings, and registration, etc. The business structure of a start-up may be in the form of partnership, sole proprietorship, private limited business or LLP, etc.
8. Lack of Proper Documentation: In many Startups, employment documentation is considered a trivial thing and is mostly ignored by many Startups. Documentation is a relationship between employer and employee. This employee documentation describes the rights and obligations of both the parties and binds them to the laws of the company. It includes employee policies, performance improvement plans, initial job offers, Employment Contracts.
9. Non-disclosure Agreements: Whenever a business is carried on there are some confidential matters which have to be kept confidential and it can include anything confidential information about a company. This comes into the picture when a Startup thinks to merge or start a Joint Venture with another company. Therefore, one must be aware of its company’s information and draft a Non-Disclosure or Confidentiality Agreement with another company. With a lack of said Agreement, a Startup will get into a plethora of troubles.
10. Data Protection and Privacy Issues: In the world of digitalization, all startups used to prefer a digital mode of operating their business. The problem which businesses face with digitalization is the storage and use of the personal information of the users. Such information is obtained by the business as soon as the user accesses it website or app. This results in the potential risk of violation of privacy of the users. The businesses are required not to access any sensitive information of the users without their permission. Further, they should not seek rights that their website or application does not require. Most startups now enter into an agreement which is in the form of a privacy policy to which the user has to agree before accessing or signing in to any program.
11. Tortious Liabilities in Contract Management: A startup in the operation of a business undergoes many contracts with its employees, suppliers, buyers, and co-founders. To avoid any future dispute, it is important for startups to formulate a well-written and accurate contract. However, if the startup fails to comply with the terms and conditions of the contract or does anything contrary to the contract, it will result in tortious liability on the part of the startup.
India is currently witnessing a wave of startups. The number of startups is increasing in the country. According to the Department for Promotion of Industry and Internal Trade, at present India have 61,400 recognized startups. The increased number of startups not only help in the economic growth of the country but also acts as a source of Foreign Direct Investment (FDI) and helps in creating more employment opportunities. We at Spinach Laws are assisting and helping startups to combat all the above challenges to achieve their goals.
