Legal Issues faced by a Startup in India

Priyasha Sen Gupta, Flywork.io Team, Flywork.io.

Law has a huge impact on stable companies and startups. Even with a basic understanding of law, there are unforeseen pitfalls and problems that new and young businesses cannot foresee. These problems can become more compelling and pose serious threats in startups, which could lead to the failure of a good company. Some of the common issues faced by startups and the reasons for the same are as follows

Absence of Founder’s Agreement

A founder’s agreement is an agreement that describes the position of the founders and the conditions they must comply with, and defines the role, responsibilities and duties of each founder of the company. A founding agreement is a basis for how the co-founding relationships will work in the future, how a company is structured and what each owner brings to the company that is not included in the company's operating agreements. The absence of this agreement leads to mismanagement within the founders.

Absence of Employment Documentation

In many startups, the employment documentation is considered a very trivial formality and is ignored by the company, this leads to various unforeseen and unanticipated problems. The employment documentation is established as a relationship between the employer and the employee. The documentation is made available to the employer and employees of their rights and obligations in the company and binds both parties to the company's laws. Employment documentation includes:
 • Employee Stock Option Plan Documents 
 • At-Will Job Offer Letter 
 • Employment Contract 
 • Confidentiality Agreements

By-Laws

In order for startups to run smoothly and easily, founders need to plan strong by-laws from the beginning. The By-Laws must stipulate the company's internal rules, such as dispute resolution, shareholder rights and powers, and management choices.

Lack of legal protection for intellectual property

Inaccurate and inadequate protection of intellectual property rights can have serious financial implications. Ideas, products or company logos and brands must be protected to prevent them from being misused by competitors. Trademark rights must be related to logos or trademarks; similarly, copyright should be used to obtain rights to the original work.

Improper licensing

Any commercial transaction of any particular product or service needs to obtain the licenses and compulsory licenses of various departments in order to make the enterprise operate normally. Many startups fail to comply with these rules due to a lack of legal awareness, resulting in financial and major losses including hefty penalties. 

Insufficient due diligence before fundraising

A start-up goes through several fundraising steps, self-financing, start-up capital, etc. so a proper due diligence exercise should be conducted at the time of those procedures for the presence of ample funds within the business.
 
Lack of confidentiality agreement

Whenever a startup company discusses an important topic or reaches an agreement with other companies or people outside the business or non-employees, the interlocutor must sign a confidentiality agreement. This agreement is used to maintain the confidentiality of the information of both parties. A lack of the said agreement could lead to a plethora of problems.
 
Conclusion

It is a famed and indisputable fact that startups work on tight budgets and have even tighter financial limits to spare on the various compliances needed by the law. However, it's crucial for such business models to know the importance of guaranteeing correct legal compliances before venturing into growth. A one-time investment within the space of legal compliance and due diligence shall save them from being closed up in the future once the company grows. Further, drafting a legitimate and watertight employment contract shall save the corporate from various litigations concerning employment and labour problems. It is henceforward necessary that the startups analyse and stay alert to all the mandatory due diligence processes and compliance needs at the time of incorporation as a preventive measure against any future legal problems.

The Indian government has been very attentive and accommodating to the startup culture, especially in the area of ​​tax formalities, and has therefore implemented many reforms to provide less strict and complicated guidelines for easy onboarding and rapid growth for such companies. Hence, it is a smart business move for startups to benefit from such friendly policies in our country and protect themselves from future losses, closings, litigation or other unexpected issues that may arise due to non-compliance.

Let the qualified curated professionals at Flywork.io assist you to resolve any legal and allied issues. For more details visit us at Flywork.io.

 

What is an affidavit of heirship?

By Nevin Clinton Flywork.io Team, Flywork.io.

    An affidavit of heirship is a written statement which verifies that an individual is a legal heir when he dies without leaving behind a will. The affidavit helps in transferring the property of the deceased to the individual named in the document. It is also used to identify the legal heirs of the deceased to a court. Before delving into the need for the affidavit of heirship and its essentials, it is essential to understand who a legal heir is and what is heirship.

    Heirship is an individual’s right to receive a share of the property of a person who died intestate i.e. without a will. The person who has the right is called a legal heir and it is usually children, descendants, and relatives of the deceased who are the heirs. An affidavit on the other hand is a written statement that can be used as evidence by the court. So an affidavit of heirship is essentially a written statement that confirms an individual as an heir. 

Need for an affidavit of heirship
    It is worth noting that even without a will as well as an affidavit of heirship, a probate court will review the deceased’s debts and determine how his property will be distributed among the legal heirs. But this process is extremely lengthy and risks incurring huge expenses as well. Therefore, if all the legal heirs agree to an affidavit of heirship, the process will be made simpler and the probate court needn’t take the burden of making decisions on distributing the property. 

    Further, even if a will was made by the deceased, an affidavit of heirship can be drafted. This is once again to save time but the affidavit must be similar to the actual will and the wishes of the deceased. If a case arises where the affidavit’s statements contradict those in the will, it is the former which will be considered invalid.

Essentials of an affidavit of heirship

  • Details of the affiant: First and foremost, the affidavit of heirship must have all details on the person filing it. Name, address, contact details, and the like must be provided in the very beginning.
  • Declaring relation with deceased: The relationship of the affiant to the deceased person and details on the death of the said person must be mentioned. The cause of death if known must be provided as well. 
  • Details on the deceased: The name, address, contact details, and other details on the heirs of the deceased person must also be given in the affidavit.
  • Detail on the property: Complete details on the property and debts of the deceased person, if known, must be mentioned in the affidavit. 
  • Signatures: The affidavit of heirship must be signed by the affiant, the notary who is officiating proceedings, and preferably by a third party attesting to the fact that the information mentioned in the document is true. After the affidavit is drafted and signed, it has to be filed at the concerned court. 

    Apart from the aforementioned, it is necessary that the basic requirements while drafting an affidavit must also be kept up with. The Kerala High Court in K. Chandrasekharan vs C. Sasidharan Pillai And Ors. laid down certain essentials. Firstly, while providing a piece of evidence, there must be documents and sources to back it up. It is necessary that proof in the form of particulars must be given. If there is no proof and if it’s up to the court to decide on a matter, the affiant must not merely state that he is of the belief that something is true. He must mention the grounds as to why he believes so. So, the aforementioned points must be kept in mind as well while drafting an affidavit of heirship. 

Affidavit of heirship is an important document and it is advisable that legal personnel draft it

    It is always preferable to have an attorney or a legal professional familiar with the process to draft the document. This would ensure that key details and essentials are not missed out. If such a mishap happens, the affidavit will be considered invalid and a new document will have to be drafted.

Let the qualified curated professionals at Flywork.io assist you to resolve any legal and allied issues. For more details visit us at Flywork.io.

Legal Ethics and Technology: What has changed?

Nevin Clinton, Flywork.io Team, Flywork.io.

What is legal ethics?

Legal ethics refers to a set of norms on how an advocate must conduct himself/herself and behave in a professional workspace. Such professional ethics are of paramount importance for any occupation and it is no different in the legal field as well. Now, there are various written and unwritten rules on legal ethics that each advocate is expected to follow not only in India, but around the world as well.

Need for Legal Ethics

Having and following a code of legal ethics is crucial because there is a sense of nobility and honour associated with the legal profession that is necessary to be preserved. Professional behaviour and friendly cooperation thanks to legal ethics helps in doing the same by establishing smoothness of operation in the court. Unwarranted behaviour by legal personnel on the other hand, would tarnish the image of the legal professional and lead to lesser confidence among the general public. Such a situation would turn out to be extremely problematic because of how high a regard the integrity of the legal profession is held in. Thus, it becomes essential to clearly establish a code of legal ethics and the lawmakers in India have done the same.

Legal ethics in India

Legal ethics in India is provided by rules passed by the Bar Council of India as well as the provisions of the Advocate Act, 1961. According to these, there are various duties imposed on advocates towards the court, clients and colleagues. 

Some of the duties towards a court imposed by legal ethics on an advocate include behaving in a dignified manner, respecting the dignity of the court, not using foul language in the court, appearing in proper dress code, not appearing in matters of pecuniary interest etc. Similarly, towards the clients, advocates have certain duties like not withdrawing from service, upholding clients’ interests, keeping discussions confidential, not appearing for opposite parties and so on. Not following these ethics could result in a complaint being filed at the State Bar Council which can result in a warning, suspension or removal of the advocate from the state roll.

Legal Ethics and Technology: The position in India and around the world

With the advent of modern technology and its impact in virtually all fields of work, it becomes necessary to examine the legal profession as well from a technological viewpoint. With technology ruling the roost and playing a key role in all operations around the world, advocates must also stay competent and abreast of advancements. Thus, integrating technological aspects into legal ethics becomes necessary at the moment.

In India, rules governing legal ethics have not been amended to include any technological aspect. But that is not the case with most countries around the world. For example, the USA has brought in amendments to its American Bar Association Model Rules of Professional Conduct. Rule 1.1 of the same states that a lawyer must competently represent his client by staying abreast of changes in law “including the benefits and risks associated with relevant technology”. 

What has changed?

Technology has become an inescapable part of the legal profession around the world today. Right from documentation to communication to even litigation, everything is done online. Further, there is ready availability of data online which leads to ease of research and better quality of service by advocates. Also, technology helps eliminate risk of errors while also ensuring better resource management. There is a heightened sense of transparency as well. For example, technology has ensured that legal solutions and opinions can be sought online. Similarly, availability of chatting options with various advocates helps in creating a marketplace where clients can choose their lawyers. 

Need to include provisions on technology in legal ethics

Due to the various aforementioned uses of technology in the legal profession, it becomes essential to use these in an ethical manner. It is quite easy to manipulate information online and hence, lawyers must be bound by certain norms. Further, like the American Bar Association Rules say, competence is key for a lawyer in the field of technology. One must stay aware of the need to use technology in an effective way. Ensuring data security, preservation of documents and so on which were of significance even before the advent of technology are all the more important at present. A lack of knowledge on these technological developments could have detrimental effects on a lawyer’s performance. That is exactly why the Bar Council of India must also strive to make provisions on technology in the legal ethics of the country.

Let the qualified curated professionals at Flywork.io assist you to resolve any legal and allied issues. For more details visit us at Flywork.io.