“These essentials are essential for your startup”

After you have formed your startup team and completed other procedures, it is important that you finalise following agreements to cement your legal relationship to other stakeholders. These legal documents are those basic documents which would crease out most of the legal issues your new startup would face-

Shareholders Agreement/Founder Agreements

It is extremely important for co-founders to define the scope of their business relationship. Often overlooked by the founders because of the trust they bestow upon each other, a founders agreement helps avoiding bitter tussles in future (Remember, The Social Network?) A founder agreement defines issues such as who will get what percentage of the company, roles and responsibilities as co-founders, exit routes, salaries of the co-founder, goals and visions of the company etc.

Intellectual Property Assignment Agreement

As the name suggests, an Intellectual Property Assignment Agreement covers the issue of assignment of intellectual property. This assignment can be two folds- the founders assigning the intellectual property to the company or employees assigning their intellectual property.

The law in India on this issue is not completely clear. Typically, an employer does become the owner of a copyright-able article created by an employee during the course of and within the scope of his employment. An intellectual property assignment agreement fills the void that the law does not fill with respect to other forms of intellectual property. An assignment agreement allows the employer to define scope and extent of intellectual property as per his needs. It also allows the employees to waive their rights- both economic or social over the intellectual property so developed. An employer may also include cooperation related provisions that would allow him to use the intellectual property so assigned to him.

Non-Disclosure Agreement

Protecting trade secrets is a primary concern startups face. Even a mere organization chart or a small algorithm can be the key to a business’s success. Hence, it becomes imperative that a company guards its secrets well. A non-disclosure agreement creates an agreement where a party agrees not to share confidential information of the other party. It can be either for a specified period of time or otherwise.

A non-disclosure agreement should clearly state the information which shall not be disclosed. Such information may include but not limited to patentable inventions, copyrightable material, trade secrets, list of customers or any other information the leak of which may cause severe damage to the company.

Employment Agreement

An employment agreement lays down the terms and conditions of employment including the remuneration, perquisites, work rules, term of employment, grounds of termination, duties and responsibilities, work profile, non-disclosure etc. It is advisable that you, as an employer should execute employment agreements along with the offer letters. Including the right covenants in the agreement is important since the employment agreements are subject to numerous employment and labour laws.  It is suggested that an employer makes a verbal offer, negotiate the key issues of the employment agreement and then prepare the formal documents.

HR Policy and Bylaws

Often ignored by startups in their initial years, a HR Policy is a must for all types of startups. A HR policy essentially includes various policies and procedures that an employer is typically subject to.  While drafting a HR policy, focus should be on drafting it in accordance with all applicable national and state laws. This is important because many employment related laws mandate incorporation of certain issues in a company’s HR Policy. For instance, the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 mandates that anti-sexual harassment policy be drafted in accordance with the law.

The HR policy should also address other issues such as Employee benefits, Leave policies, Compensation policies, Complaint procedures and resolution policies, Code of conduct policies etc.

Startups also ignore the importance of bylaws. Bylaws are extremely important to streamline the corporate governance of your company. They help in better administration and management of the company. If your startup does not have well thought out by laws, any controversy would be resolved by recourse to the laws. This effectively takes away the administration of your startup from your hands.

Online Agreements

Online agreements such Terms of Use and the Privacy Policy govern the relationship between you and your customers and those accessing your website. It is often noticed that startups do not invest time in drafting them and prefer copy pasting them from other websites. This may have severe consequences and hence is not advisable.

The online agreements should be carefully drafted since absence of key provisions may lead to imposition of substantial liabilities on you.  They can be either in the form of browse wrap agreements, click wrap or shrink-wrap agreements.

In a click wrap agreement, a party accepts the terms and conditions by checking on an ‘I accept” tab.  On the other hand, a browse wrap agreement binds the parties by mere use of the website. Products involving licensing often use shrink-wrap agreements where the parties can read the terms only after unboxing the product packed. You should choose the right type of online agreement only after assessing your demands and portfolio.