Startup India Registration

What Legal Documents are needed for a Startup? The Must Read Topic

A start-up is typically defined as a business that was incorporated and registered in India. In layman, terms start-up is a "young firm" that is just getting started, like seeds that are sowed and grow either because the founder of that startup has a novel concept regarding a product or service to tackle a challenging social issue. Through this article, we will explore the legal documents for start-ups in depth.

The startup may prosper, but a small number may fail. Why do some startups succeed while others do not? Every time we launch a new business, we need to take precautions to avoid getting into legal trouble by not paying attention to any crucial legal paperwork for start-ups that are necessary for registration and recognition. So, what are the steps involved in registering a start-up in India, and what paperwork is needed? In this post, fundamental yet important issues relating to startups in India are clarified.

Startups in India: Their Evolution

The startup concept in India didn’t develop overnight; rather, it did so gradually. The first start-up revolution began to take shape in 2008, the year when a worldwide financial crisis erupted. Businesses reallocated their resources as a result of the crisis, which led to an increase in unemployment, particularly in the information technology sector. The youthful nation was shaken by the fear of losing one’s job and the unquenchable need to show one’s grit. Startups in India are renowned for their late-night celebrations, adaptable work environments, and free-from bias. Young Indian businesspeople never stop innovating and using their extraordinary talents.

Some Businesses Prosper While Others Fail

  • The success of a particular startup depends on its creativity, its capacity to attract the best employees, its capacity to anticipate future trends, and its ability to adapt as quickly to the advancement of technology and rapidly changing business environment
  • It is always helpful to have a good mentor to help them through the difficult situations, and to create a workplace that values purpose before profits.
  • But at the other hand, lack of tenacity, inaccurate pricing, faulty market assumptions, tardiness in executing ideas, a fear of taking chances, a poor work ethic, lack of funding, and an inability to adjust to the fast-paced changes in the business environment are the reasons why start-ups fail. These are all the causes of both success and failure.

Online Service Providers

If you’re predominantly an online services company – a cab service like Ola or Uber or mobile wallet like PayTM and MobiKwik or food delivery service like Foodpanda or Tiny Owl – here are some of the key legal documents you will want to have in place:

Terms of Use/Service

Purpose: To communicates to the user of the website/app the terms on which the website or app may be used and the conditions of service.

Example: If you are an app- or website-based cab service, the document will outline the relationship between the user and the company, including but not limited to method of payment, how to book a cab, cancellation policy, cab fare and the limitation on the user’s utilisation of the information displayed on the website. The terms-of-use document is often subject to change without notice – a condition the user agrees to upon continued use of the website.

Privacy Policy

Purpose: This document declares the business’ policy regarding the information provided to the website by the user/client. It is mandatory for e-commerce websites to have a privacy policy on their websites.

Example: An online cab services company would be required to have a privacy policy where it lays down exactly how it will use the information furnished by website users. An example of a common provision that can be found in companies’ private policies is confidentiality of bank details and payment information provided by the user.

Master Service Agreements

Purpose: A master service agreement is a contract between the service provider and the client, consolidating the terms and conditions governing all future transactions between the parties over a longer period of time. This avoids repetition of negotiations and multiplicity of contracts.

Example: An example of a Master Service Agreement is between companies such as SnapApp and its clients, who can use the app platform to create, deploy and manage interactive content for marketing purposes. Such an agreement contains provisions regarding intellectual property ownership, payment terms, customer support details, data protection,confidentiality and limitation on liability.

Service Level Agreement

Purpose: An SLA is a contract between a service provider and a user, providing the framework for the provision of the service, how downtime will be dealt with and the response time for customer support.

Example: Online services providers such as Microsoft Online Services provide the client a number of services such as Office Web Applications and organizational email services, and cloud services, and the client and service provider enters into a service level agreement, specifying the extent of the service level commitment, downtime and response time.

Offline Service Providers

If you are a service provider offering services offline, such as IT consultancy services or mobile/car servicing and repairs, here are the documents you need in place:

Terms of Service

Purpose: To communicates to the user the terms on which the service is being offered and all its conditions.

Example: Service providers such as courier companies may have Terms-of-Service agreements specifying the relationship between a courier company and its clients. Provisions include indemnification due to loss of package or damage and limitation of liability of the service provider.

Master Service Agreement

Purpose: A master service agreement is a contract between the service provider and the client, consolidating the terms and conditions governing all future transactions between the parties over a longer period of time. This avoids repetition of negotiations and multiplicity of contracts.

Example: A company providing IT consultany services on a continued basis to a large organisation will enter into a Master Service Agreement that specifies the payment terms, term, termination and liability of the service provider.

Service Level Agreement

Purpose: An SLA is a contract between a service provider and a user, providing the framework for the provision of the service, how downtime will be dealt with and the response time from customer support.

Example: Companies offering services for servicing of cars ener into these agreements with customers, laying down the terms of maintenance, performance metrics, billing, payment and dispute resolution.

Online Product Providers

If you are selling products online, whether through other vendors on a website you own, via your own website, or via Flipkart, Amazon or Myntra, you would be in need of the following documents:

Terms of Service

Purpose: This document communicates to the user of the website/app, the terms on which the website or app may be used. If you are an online retailer or retailing platform (e.g. Myntra, Amazon etc.), then your website will require a link to a document which provides for the to method of payment, return and exchange of products policy, delivery of the product, limitation on the user’s utilization of the information displayed on the website etc. The terms of use document is often subject to change without notice – a condition the user agrees to upon continued use of the website.

Privacy Policy

Purpose: The Privacy Policy declares the company’s policy regarding its use of the information furnished on the website by the user/client. It is mandatory for e- commerce websites to have a privacy policy on their websites.

Example: Any online retailer/retail platform, from the smallest to Amazon and Myntra, is required to have a privacy policy laying down how the information furnished by website users will be used. An example of a common provision that can be found in companies’ private policies is confidentiality of bank details and payment information provided by the customer.

Vendor Agreement

Purpose: It is a comprehensive vendor agreement covering various aspects such as the quality of goods supplied, duration of the contract, term and mode of payment. It can also be an agreement with a logistics provider you have employed to deliver your goods.

Example: Online retailing platforms such as Big Basket commonly enter into vendor agreements with different retailers who can sell on the website. Such an agreement would specify what the vendors liabilities are, the quality of groceries that must be supplied and how the goods are to be delivered.

Offline Product Providers

You’re in luck as an offline product seller. If you’re manufacturing and selling your own products, you have little need for documentation. But you do need documents in place if you have franchisee stores or host exhibitions.

Franchise Agreement

Purpose: For the franchisor to lend the trade name or business system to another person or entity (the Business franchise).

Example: Brands such as McDonald’s and Subway have franchisees across the world using their trade name and business system. They rarely run stores themselves. With franchisees, they enter into contracts that define the basis of the arrangement, specifying the consideration to be paid by the franchisee, how the brand name can be used, the length of the arrangement, who will take on marketing expenses, and clauses dealing with penal provisions, ranging from fines and compensation to cancellation of the franchise.

Vendor Agreement

Purpose: It is a comprehensive agreement with a vendor, covering the space allotted to him, the quality of the goods that will be supplied, the duration of the contract, term and mode of payment, how marketing activities can be conducted on the premises, etc.

Example: If you’re running an exhibition, you will need several vendors to sign up with you. Let’s say it’s a property exhibition. You would want the vendors to agree to a set of conditions, such as where they can promote their brand, the terms and mode of payment, place limitations on how they can decorate their space, etc. All this would be in the vendor agreement.

Conclusion 

In order to succeed in this competitive market, you need to have all the legal documents you need. Legal documents play a crucial role in the success of a startup. Always seek the assistance of the experts who provide legal services in India, like Vakilsearch, if you are stuck with any procedure or need guidance. Their legal services have been around for many decades.

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