Importance of a Well-drafted Legal Documents for a Startup
12 Oct 2016  |  Views: 409  | 

Start-ups are all about experimenting, dreaming big, having courage and taking a leap of faith. But along with taking a leap of faith in yourself it’s also about taking leap of faith in others like lawyers, investors, venture capitalists. The one thing that start-up teaches is that you can’t do everything on your own and there is no shame in taking help from those who expertise in it. When launching a start-up everyone wants to make it as valuable as possible, so, the easiest way is by making your entity as legally solid as possible.

Nobody likes doing paperwork, but few paperwork if not done can put you behind bars. It’s advisable to get all your documents well-drafted by a lawyer as it leaves less scope of misinterpretation. Even a single word can change the nature of your agreement, which may end up being unfavourable to you. Sometimes, the whole agreement becomes void because of over restrictive clauses. At the time of fund raising, potential investors will do due diligence and will inspect books of accounts; at that time you would want every document to be satisfactory and proper. And certainly you don’t want to fight a legal battle over an ill drafted documents. Don’t shy away from taking help of Experts.

Lots of documents needs to be prepared at the time of Incorporation, but make sure at least you get Articles of Association and Memorandum of Association drafted by an expert because those documents act as the constitution of the company, setting ground rules that will govern how company functions, appointment of directors, procedure for board meetings and the rights and restrictions that will attach to each class of the company’s share. You just simply can’t mess with those documents.

The moment your start-up has more than one owner, you will need to decide the following:

  • who are equity shareholders,
  • what are their voting rights,
  • how important decisions would be made,
  • how capital would be raised,
  • how will shareholders exit,
  • whether you require pre-emption rights or not.

Shareholder’s Agreement does exactly that, probably it will be the most important contract you will enter into, after all its about ownership. You surely don’t want it to be legally challenged in courts and cause tussle between stakeholders. 

Various other documents like Employment Agreement which will govern the relationship between you and your employee also requires special attention.
Non-Disclosure Agreement which safeguards you from disclosing your secrets must be drafted by an expert to remove any loopholes.
Intellectual property assignment agreement, Vendor agreements, Trademark registration also will require expert's help.

Not establishing a solid legal foundation may curb your momentum or corrode your start-up capital. Without an iota of doubt, entrepreneurs are people of action and when there is a platform like LEGISTIFY which provides you with these documents in few minutes at the fraction of money charged by lawyers there should be no excuse for overlooking these legal points. Get it properly drafted and get it NOW!




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