Overview of Legal Services for Start-ups

Startups must provide their employees with several types of leaves, such as bereavement leave, sick time or sick leave, fatherhood or maternity leave, compensatory work off days and casual leaves, in addition to the earned leaves granted under Indian labour legislation.

After money, the amount of yearly leave days and the policy that goes with them are the next greatest aspects that employees strive for in a job. Earned holidays or yearly leaves are paid days off that an employee is entitled to in addition to holidays. As a result, firms must exercise extreme caution while planning their employees' annual leave. Generic references will allow you to appropriately construct a paid leave policy in your employment agreements.

Types of Leaves for Employees of Startups

Several types of leaves that can be availed by employees of a startup in India are:

Sick Leaves:

• Used for both short and long-term health needs.
• Availability depends on company and state laws.
• Can be used for personal or family member's illnesses.

Casual Leaves:

• Granted for unexpected emergencies or incidents.
• Typically, available after the probationary period.
• Requires prior authorisation.

Statutory Leaves:

• Mandated by state or national norms for the benefit of the working community.
• Governed by labour laws and should be included in company policies.

Maternity Leave:

• Provided to female employees before and after childbirth.
• Duration varies based on several factors like adoption and third child policy.
• In India, the paid maternity leave period has been extended by the 2017 amendment.

Bereavement Leave:

• Granted upon the death of a close family member.
• Generally, it ranges from 1 to 7 days of paid leave.
• Offering bereavement leave demonstrates empathy and values employee well-being.

Sabbaticals:

• Long-term leaves taken for travel, further studies or personal breaks.
• Usually unpaid and extended over an extended period.
• Retaining the job is assured, but specific policies may vary.

Roll-over Leaves:

• Allows unused leaves to carry forward to the following year.
• Prevents leave lapses and provides flexibility for employees.
• Acknowledges employees who have accumulated unused leaves.

Factors to Consider When Designing a Leave Policy by Startups

The following factors are necessary to be kept in mind when designing a leave policy by startups:

Company Size:

• Start-ups: Consider flexible leave policies to accommodate the ownership mindset and drive for company growth.

Nature of Business:

• Onsite Employees: Align leave policies with client requirements for seamless operations.
• Weekend-Intensive Businesses: Adapt leave policies to allow flexibility during weekdays for employees working on weekends.
• Shift-based Work: Incorporate compensatory leave or compensation for employees working double or extra shifts.

Other Perspectives:

• Parent company Impact: Recognise and incorporate local holidays celebrated by the parent company's culture.
• Festivals and Holidays: Account for major local holidays alongside those observed by international counterparts or clients.

Find professional help at StartupFino for better understanding and drafting of Leave Policies for your start-up’s needs.

Maternity Policy for Startups

Maternity leave in India is a paid leave of absence from work which is meant for the female employees to be able to care for their new-born children while keeping their jobs and not being laid off due to pregnancy and after care of children.

The Maternity Benefit Act was passed in 1961 and gave mandatory provision that women employees get their share of 12 weeks of leave (which is paid as per industry standards) after childbirth. This Act applied to businesses with ten or more employees. The Act applies to all women who work on a contract, on a permanent basis or for government organisations.

The current employment situation has changed and we now have a considerable number of female employees. The maternity statute was subject to amendment as a result of socio-economic changes and finally in the year 2017, The Maternity Act was amended to inculcate the changes.

Eligibility for Maternity Leave:

A woman employee is eligible to maternity leave under the Maternity Benefit Act if she has worked for the firm for at least eighty days in the previous twelve months. This ensures that the employee has an established connection with the organisation and meets the eligibility criteria for availing maternity benefits.

Extension of Maternity Leave:

The duration of maternity leave has been extended from 12 weeks to 26 weeks with the implementation of the Maternity (Amendment) Bill 2017. The same is not available to the birth of a third child, for which the maternity leave given is only 12 weeks.

Amendments made to maternity leave as per Maternity Benefit (Amendment) Act 2017

Key changes under the new maternity leave law in India are:

1. Maternity leave - extended from 12 weeks to 26 weeks, providing longer duration of paid leave to women employees of the organisation.
2. Organisations with minimum 10 employees have to mandatorily comply with the law now.
3. The prenatal leave period has been increased to 8 weeks.
4. Mothers already having 2 children are eligible for 12 weeks of maternity leave on birth of their third child.
5. Women adopting a child under 3 months of age are also entitled to a 12-week maternity leave.
6. Commissioning mothers i.e., who are biological mothers but not the ones giving birth, are eligible for a 12-week leave starting from the day the child is handed over,

Starting a new business for the first time can be tough, especially when it comes to understanding complex legal jargon (terms and language used) and preparing the necessary documents. However, with a basic understanding of legal requirements, the right guidance and access to reliable legal documents, understanding the legal aspects of starting a startup can become easier and more affordable.

Important legal documents for startups

Some indispensable legal drafts required for startups are:

• Share Transfer deed: Executed during share transfers to founder members, directors, employees or investors, containing terms and conditions, share price and conditions for nullification.
• Rent or Lease agreements: Agreements for office space, whether using a founder's place or rented space, to clarify tenancy terms and prevent unexpected eviction.
• Vendor/Contractors Agreement: Written agreements with vendors or contractors, covering terms of service or goods supply, payment terms, deductions on service defaults, accepted service levels.
• Offer Letter: An offer letter is a written document provided by a startup to a selected candidate, containing terms and conditions of employment, job details, starting date, salary and other relevant information.
• Appointment Letter: An appointment letter is issued to a candidate who accepts the offer letter and joins employment. It provides detailed information about the position, salary, benefits, work policies, confidentiality and other essential employment details. Offer letters are brief, while appointment letters provide more comprehensive information.
• Non-Disclosure Agreement: A Non-Disclosure Agreement (NDA) is signed on the employee's joining date. It is a legal contract between an employer and an employee, outlining the responsibility to protect confidential information and restrict access by third parties. NDAs specify the confidential information and the terms for its protection and disclosure.
• Website Privacy Policy: A website privacy policy is a legal document or statement that discloses how a website gathers, uses, manages and discloses customer data. It is necessary to comply with Indian Information Technology Rules, 2011 and is often required by payment gateway providers for online businesses. Privacy policies safeguard personal information and ensure transparency in data handling.
• Employment agreements: Offer letters and appointment letters for new employees, specifying terms and conditions, including termination circumstances.
• Service Level Agreements (SLAs): Agreements with customers and vendors defining the expected level of service, providing legal support in case of disputes.
• Founders Agreement: For startups not organised as private limited companies, this agreement outlines terms and conditions between founders, including shareholding and future share allotment.
• Other Documents: Additional documents tailored to the specific needs of the firm, such as term sheets for investors, anti-dilution agreements, non-disclosure agreements, etc. These can be recommended by our expert team at StartupFino based on the start-up’s requirements.

Having these legal documents in place ensures clarity, protection and minimises the potential for legal disputes or conflicts as the startup grows and operates.

Founders’ Agreement for Startups

A Founders Agreement is a document that establishes contractual duties between a company's owners/founders. The document includes many aspects such as the firm's functioning, management, ownership and the founders' responsibility to the company. The goal of the document is to protect the company's interests and to avoid any future conflicts.

The document has various clauses. These sections define co-founders' rights, liabilities, ownership and responsibilities. It is basically drafted to protect the interests of each co-founder and to resolve disputes over company ownership.

Important Clauses Present in a Founders Agreement

Some key provisions to be included in a founders’ agreement are:

• Ownership or Equity Ownership: In a founders’ agreement, startups should consider factors like equity distribution between founders, investment, intellectual property rights and networking opportunities.
• Exit of Co-Founders: The agreement should include an exit clause to define voluntary or forced exits, outlining a formal process or procedure.
• Roles and Responsibilities: Clearly specify the roles and responsibilities of each co-founder to ensure effective division of tasks.
• Transfer of Shares Restriction: Include clauses addressing restrictions on share transfer, such as lock-in periods and valuation methods.
• Assignment and Licensing of Intellectual Property: Ensure that the founders assign intellectual property rights to the company, securing ownership of created assets.
• Additions of Value from Co-founders: Include provisions for any additional value contributed by co-founders, such as proprietary information or technical know-how.
• Non-Compete Clause: Incorporate a non-compete clause in accordance with the Indian Contract Act, limiting competition during employment and for a specific period after termination.
• Confidentiality: Address confidentiality through a Non-Disclosure Agreement (NDA), protecting sensitive business information.
• Data Protection: Include provisions for data protection, adhering to principles of GDPR and the personal data protection bill.
• Terms of Employment: Define the terms of employment for individual founders and consider separate employment agreements covering rights, duties, shareholding and remuneration.
• Decision Making Ability: Specify decision-making abilities and designate departments or areas of responsibility for each founder.
• Prospective Finance and Investment: Detail the provision of future finances, whether as equity or debt, in the agreement.
• Dispute Resolution: Include a clause for resolving disputes between co-founders through arbitration, reconciliation, mediation or out-of-court settlements.
• Termination: Incorporate a clause for termination of the agreement, outlining post-termination provisions and obligations.

Customer Service Agreements for Startups

A service agreement is a contract that specifies the terms and obligations of any firm or organisation that provides a service and the client who uses it. The provisions of this agreement establish the nature and form of the service, the obligations of the parties, the recompense or payment and the services to be supplied. It also covers the scope of services that both parties have promised to serve and enjoy in order to displace any third-party claims and in such a scenario, a set of limited liabilities is imposed on both signing parties. This agreement ensures that neither the service provider nor the consumer end up in a dispute and that both parties' interests are protected.

Advantages of having Service Agreements:

There are certain benefits of having a well drafted service agreement between the concerned parties due to following factors:

• Dispute Avoidance: Having a Service Agreement helps prevent disputes between companies, ensuring a smoother business relationship.
• Litigation Reduction: It reduces the likelihood of legal battles and the associated costs.
• Improved Negotiations: The agreement facilitates better negotiation processes between parties.
• Protection for Parties: The Service Agreement safeguards the interests of both parties involved.
• Resolution Assistance: In case of disputes, the agreement provides a framework for resolving conflicts.
• Future Negotiations: It serves as a foundation for future negotiations and agreements.
• Time and Cost Savings: By establishing clear terms and expectations, the agreement saves time and money for both businesses.

Basic Contents to be included in Service Agreement for Startups

The provisions and clauses included in the service agreement to govern the relationship between the parties are:

• Term of the Agreement: The duration or length of time for which the service agreement is valid.
• Payment Conditions: The terms and conditions related to payment, including payment methods, frequency and any applicable penalties or discounts.
• Service Definition: Clearly defining the nature and scope of the services to be provided under the agreement.
• Service Scope: Outlining the specific tasks, responsibilities and deliverables included within the scope of the services.
• Inclusions and Exceptions: Stating what is covered and what is not covered under the service agreement.
• Ownership Entitlements: Addressing the ownership rights of intellectual property or other assets related to the services.
• Non-Disclosure: Protecting confidential information and outlining obligations regarding its disclosure or use.
• Party Rights and Duties: Enumerating the rights, obligations and responsibilities of each party involved.
• Outsourcing: Addressing the possibility of subcontracting or delegating certain services to third parties.
• Assurances and Guarantees: Providing representations, warranties or guarantees regarding the quality or performance of the services.
• Compensation: Establishing the method and amount of compensation to be paid for the services rendered.
• Liability Limitations: Defining the extent of liability and any limitations on the parties' responsibility for damages or losses.
• Termination Procedures: Outlining the process and conditions for terminating the service agreement.
• Applicable Jurisdiction and Dispute Resolution Methods: Specifying the governing law and mechanisms for resolving disputes.

Vendor Agreement for Startups

A Vendor Agreement is a legal and written contract that specifies the criteria and terms of the vendor's work. A vendor is someone or anything that provides a specified amount of product or service to a consumer. A basic vendor agreement must include information like the time, date and location where the vendor must perform the required services.

Use of Vendor Agreement for Startups

The following are essential uses of a vendors’ agreement for startups:

• Increases Efficiency: A well-drafted vendor agreement helps streamline processes for the startup, clarify expectations and establish clear deliverables, resulting in increased efficiency in vendor management.
• Identifies and Manages the Risk of the Vendor: A comprehensive vendor agreement helps identify and mitigate potential risks associated with the vendor's performance, quality, compliance and confidentiality, protecting the interests of both parties.
• Increases Performance: By clearly outlining performance metrics, timelines and quality standards, a vendor agreement incentivises the vendor to deliver high-quality products or services, leading to improved performance.
• Reduces Cost: A vendor agreement with well-defined pricing terms, cost controls and penalties for non-performance helps control costs and avoid unexpected expenses for startups looking to embark on their entrepreneurial journey.
• Helps Maintain Relationships: A vendor agreement fosters a transparent and collaborative relationship between the parties by establishing clear communication channels, dispute resolution mechanisms and a mutual understanding of expectations.
• Brand Protection: Through intellectual property rights provisions, confidentiality clauses and quality control measures, a vendor agreement safeguards the reputation and brand integrity of the contracting party.

Necessary Elements of Vendor Agreements for Startups

Key elements that form a part of Vendor agreements for startups are:

• Pricing: Specifies the consideration to be paid to the vendor for goods or services, either fixed or variable.
• Delivery Terms: Clearly outlines the time and conditions for delivering products or services to the customer, including the option for instalment delivery.
• Payment Terms: Defines the payment methods, penalties or interest in case of payment delays.
• Indemnity Clause: Holds the vendor responsible for compensating the customer for any losses caused by defective or damaged goods.
• Exit/Termination Clause: Provides a legal mechanism for either party to terminate the agreement, whether unilaterally or by mutual consent.
• Representations and Warranties: Includes the agreed-upon terms and conditions of the agreement as a representation and warranty.
• Confidentiality Issues: Obliges both parties to maintain the confidentiality of sensitive information shared during the agreement and prohibits disclosure to third parties.