The Ultimate Legal Guide For Startups in India

Author - Advocate Kritika Srinivasan and Associate Runa Jasia

“A startup is a company initiated by individual founders or entrepreneurs in search for a repeatable and scalable business model. Founders design startups to effectively develop and validate a scalable business model. Hence, the concepts of startups and entrepreneurship are similar”. Before starting any business or any company, it will be mandatory to pass through some legal certifications. 

What are the startup legal requirements for any startups to stay in business for the long run? The Government of India encourages the person to start a new business. There was a scheme initiated by the Government known as Startup India. There is an official website called www.startupindia.gov.in where they provide every kind of legal information regarding Startups such as List of Facilitators for Patents, self-certification, etc. In this official website they mention: 

The Government of India initiated the Startup India as a flagship movement, with the purpose of building a strong and effective ecosystem that is conducive or ideal for the growth of startup businesses, driving sustainable economic growth and generating large scale employment opportunities. Through this initiative, the Government aims at empowering startups to grow through design and innovation.

Several programs have been conducted since the launch of the initiative on 16 January 2016 by Hon’ble Prime Minister, to contribute to his vision of transforming India into a country of job creators instead of job seekers. These programs have catalyzed the startup culture, with startups getting recognized through the Startup India initiative and many entrepreneurs availing the benefits of starting their own business in India.

The complete process of conducting inspections shall be made simpler and more meaningful. Startups will be allowed to self-certify (through the Startup mobile app) with nine labor and environment laws.  No inspections, in case of the labor laws, will be conducted for more than three years. The startups may be duly inspected on receipt of a valid and credible complaint of violation, both filed in writing and approved by an officer at least one level senior to the inspecting officer.

The Startups shall self-certify compliance in respect of following labor laws:

●        The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979

●        Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996

●        The Contract Labour (Regulation and Abolition) Act, 1970

●        The Payment of Gratuity Act, 1972

●        The Employees’ State Insurance Act, 1948

●        The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

So before starting any Startup, one must fulfil the above mentioned startup laws for self-certification and also one must also keep in mind the following rules:

●        Hire a startup lawyer

It is always a good idea to hire a lawyer or any professional who knows all the required documents and knows well about Startup India scheme.

●        Research online

One must research everything regarding the Startup online. There are few startup laws and startup legal requirements and regulations which the founder must go through:

●        SEBI

According to the Wikipedia “The Securities and Exchange Board of India is the regulator for the securities market in India. It was established in 1988 and given statutory powers on 30 January 1992 through the SEBI Act, 1992.” There are some regulations which a Startup needs to pass legally which come under the SEBI regulations. They keep updating the regulations so it’s better to research them.

●        Founder’s Agreement

This agreement is created before forming the company. This agreement is done between group of individuals which defines their role, duties and their responsibilities in the company. This is a very important agreement that needs to get signed after reading it properly. 

●        Investor agreements

There are investors who are interested in investing a company. The contract designed for the investor is called as an investor agreement. This contract defines the role, power and share percentage of an investor in the company.

●        IT Laws

Information Technology laws help in protection of the company from the hackers or any security breach. It helps in maintaining the privacy and security of a company. In this technologically era people want to deal with a company where they can trust that their data is secured. It is really important to follow the IT laws for any startup as the data is everything for them.

●        Labour Laws of India

Every Startup company will require to hire employees. So they must be aware of this law and must mention it in HR policies. Matters related to concern of employees are handled through this law (also known as Labour Laws In India - (Indian) Industrial Disputes Act, 1947). It has been enacted for the settlement of industrial disputes in any industrial environment. It is very helpful in case where an employee has some disagreement with the employer. 

●        Intellectual property rights

This law focuses on the subject like Patents Act, the Copyright Act, etc. It covers the topic like trademarks, protection against any unfair competition. It protects all the property of a company. Owning this right is very important for a company. 

There are a few more legal startup laws which are essential so one must take legal advice for startups india. One must consult their lawyer for startups to cover all the startup legal requirements for their company.