This presentation attempts to inform startups and entrepreneurs about some basic legal contracts and the initiatives undertaken by the Government of India under the Startup India Action Plan.

1. Decoding The Legal Framework For
Entrepreneurs
A Presentation by Genesis Legal
Disclaimer: This presentation is a copy right of Genesis Legal. No person should act on the basis of any statement made herein or by
the presenters without seeking processional advice. Genesis Legal expressly disclaim all and any liability to any person who has
followed this presentation, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any
such person in reliance upon the contents of this presentation.

2. 1.
SELECTION OF THE RIGHT
BUSINESS ENTITY

3. Types of Business Entities
a. Sole Propreitorship
b. Partnership Firm
c. Limited Liability Partnership
d. One Person Company
e. Public and Private Limited Company

4. “Selecting the right business entity
almost entirely depends upon the vision
of the entrepreneur

5. 2.
EMPLOYEE AGREEMENTS

6. EMPLOYEE AGREEMENTS
WHAT IS IT?
 It is the primary agreement codifying the Terms of employment between the Employer
and Employee.
 It ascertains the rights, liabilities and duties of the Employer and Employee, and is a
binding contract on both the parties.
WHY IS IT ESSENTIAL TO HAVE ROUBUST EMPLOYEES?
 To agree upon the terms governing employment
 To protect the intellectual property and confidential business information of the employer
 To ensure that the employees do not engage in competing business with the employer
 To ensure smooth resolution of disputes between employers and employees

7. EMPLOYEE AGREEMENTS
WHAT ARE ITS BROAD CONTENTS?
 Designation and responsibilities
 Remuneration and incentives
 Leaves and Leave Encashment
 Confidentiality and Non-Disclosure
 Non-Compete and Non-Solicitation
 Intellectual Property Assignment
 Resolution of Disputes through Arbitration
 Covenant reserving the companies rights to formulate internal policies from time to time
 Covenants restricting employees on accepting further employment during the existence
of current employment agreement
 Termination of employment, retirement and resignation
HOW IS IT ENFORCEABLE?
 Enforceable as a simple civil suit in the Court of appropriate jurisdiction.

8. Pre-Hire & Hire
process:
1. Past employment
obligations;
2. Offer Letter, Letter
of Intent,
Appointment Letter
During Employment & Termination:
1. Non-Compete, Non-Solicitation, Non-Disclosure
etc:
2. Employment Contracts and supplementary
agreements;
3. Event based agreements (issue of shares,
additional perquisites, Directorship etc.)
4. Common Issues-Absconding employees,
irregular termination of employment, resignation
without notice period, breach of confidentiality,
employment bonds, past employment
commitments, non payment of salary by employer.
Post Employment:
1. Non-Compete, Non-
Solicitation, Non-
Disclosure, non-Poach
contracts survives
termination (only in
reasonable situations)
2.Irregular Termination
disputes
3. Full and final
settlement of Salary-
Disputes
*obtain an
undertaking from
the employee that
Employee has not
breached any
obligations towards
past employer

9. 3.
NON-DISCLOSURE
AGREEMENTS

10. NON-DISCLOSURE AGREEMENTS
WHAT IS IT?
 The first step towards protecting your ideas and intellectual property when sharing
valuable and confidential information with third parties
 Easiest and most common way of ensuring that your idea is not compromised,
made public or exploited in any way
 Sets out that proprietary information has been shared only for a specific purpose
and the recipient agreed not to share it with anyone else.
WHAT ARE ITS BROAD CONTENTS?
 Definition of ‘Disclosing Party’ , ‘Receiving Party’ and ‘Confidential Information’
 Term, if any, for keeping the information confidential;
 Restriction on the use and disclosure of confidential information which include:
o use of information only for restricted purposes;
o disclosure of information to restricted persons and on a ‘Need to Know’ basis;
o adherence to a standard of care relating to confidential information;
 Clause that confidential information is the sole IP of the Disclosing Party

11. NON-DISCLOSURE AGREEMENTS
 Indemnity in case of breach and specific relief
 Mode of settlement in case of a dispute through arbitration and the law governing
the contract
WHAT ARE ITS BROAD CONTENTS?
Vendors, service providers, consultants, employees, potential business partners etc.
QUICK TIP!
Have a standard NDA ready, drafted specifically
as per the requirements of your organization,
instead of using generic templates.
Only share “WHAT” you do but not “HOW” you do.

12. 3.
TERM SHEETS AND
INVESTMENT PROCESS

13. Term Sheets
WHAT IS A TERM SHEET ?
 A non-binding agreement briefly codifying the terms and conditions
of an investment
 Non-binding in nature i.e. none of the parties are obliged to enter
into a transaction until the execution of Definitive Investment
Agreements (Shareholders’ and Share Subscription Agreement)
 Subsequently culminates into Definitive Investment Agreements
upon completion of Legal and Financial Due Diligence
 Lays down the expectations of the parties i.e. the founder and the
investor from the transaction

14. Angel and Venture Capital Investment Process
Investor
identifies
Target
Preliminary
valuation
and signing
of a Non-
binding
Term Sheet
Detailed
financial
and legal
Due
Diligence
Final
Valuation
based on
the outcome
of Due
Diligence
Final
negotiations
and signing
of definitive
investment
agreements
Deal
closure
and
investment
upon
completion
of CPs

15. “It is essential for any startup anticipating
investment to be financially and legally sound
and to have the cleanest track record possible
in terms of corporate governance.

16. 4.
Startup India-Stand up
India!

17. Definition of startup
 DIPP has notified the definition of a startup as follows:-
Entity: A Private Company, LLP or Traditional Partnership - up to 5 years from the
date of its incorporation / registration
Turnover: To not exceed Rs. 25 crore
Eligibility: Working towards innovation, development, deployment or
commercialization of new products, processes or services driven by technology or
intellectual property.
Exclusions: Entities formed by splitting existing businesses
Business to be covered under the definition of startup only if:
(a) it aims to develop and commercialize a new product or service; or
(b) significantly improves an existing product, service or process that will create and
add value for customers or the workflow.

18. Definition of startup – contd...
 Mere act of developing the following would not be covered under the definition of
‘startup’:
▷ Products or services which do not have potential for commercialization; or
▷ Undifferentiated products or services or processes; or
▷ Products or services or processes with no or limited incremental value for customers
or workflow.
 Entity to be qualified as a ‘Startup’ to have one or more of the following (format to be
specified by DIPP):
(a) A recommendation (with regard to innovative nature of business) from any Incubator
established in a postgraduate college in India or from any Incubator recognized by GoI;
(b) A letter of support by any incubator which is funded by GoI as part of any specified
scheme to promote innovation; or
(c) A letter of funding of not less than 20 per cent in equity by any Incubation Fund / Angel
Fund / PE Fund / Accelerator / Angel Network duly registered with SEBI; or by
Government of India or any State Government as part of any specified scheme to
promote innovation; or
(d) A patent filed and published in the Journal by the Indian Patent Office in areas affiliated
with the nature of business being promoted.

19. Key Government Initiatives
 Launch of the Startup India Action Plan – A first step in the right direction
 Regulators and ministries working in sync with each other – MCA, RBI, Labour
Departmenr, DIPP, SEBI etc.
 Setting up of an Inter-ministerial board to approve of application for registration as
startups consisting of the Joint Secretary, DIPP, Representative of Department of
Science and Technology and Representative of Department of Biotechnology.
 GoI to invest Rs. 10,000 crore over the next four years into funds investing in Startups
 Exemption from capital gains tax for individuals investing upto Rs. 50 lakh in startups
focused funds
 Relaxation in taxability from royalty on patents abroad – 10%
 Section 56 Exemption stated in Action Plan not covered under the Budget 2016
 Startups to be included under the Public Procurement norms for PSUs however no
relaxation as to quality and standards
 Launch of web portal for startups by DIPP
 LTCG period for unlisted shares reduced to 2 years from 3 years - A relief for angel
investors

20. Key Government Initiatives – contd..
 Labor and Environmental Compliance - Self Certification allowed;
 FDI Provisions relaxed – FVCIs can invest in all sectors except prohibited sectors
 Startup India Hub-Hub of mentors, experts and such others facilitating the support and
guidance for entrepreneurs;
 Mobile App & Portal-Automation of most of the processes for startups-Expected to be
launched by next week;
 Legal Support-Facilitation for filing and registrations-quick and easier process to
register;
 Exit for Startups- fast track closing of companies and exits-avoids the current long
process of winding up of companies;
 Rebate in patent application fee and consultants to be engaged by startups to assist
them with filing patents
 Onerous reporting and inspection requirements under Labor Laws relaxed

21. Our Analysis
 Certification by an Inter-ministerial board – does it take us back to the License Raj?
 Definition does not cover existing companies
 Definition of ‘Eligible Startup’ in the Budget 2016 does only includes companies. Thus,
tax benefits to accrue only to startups structured as companies
 Section 56 exemption as promised under the Action Plan not included in Budget
 Clarity required on ‘What would amount to innovative nature of business?’
 Tax Exemption given to startups only for 3 consecutive years out of the initial 5 years.
How much can startups benefit?
 No exemption from Minimum Alternate Tax to Startups
 Turnover of Rs. 25 crore – too low a threshold for certain types of businesses
 Difficult for startups to access Incubators, VC Funds, PE Funds etc. in initial stages
 Patent registration itself takes 3 years making the requirement almost redundant

22. Thanks!
Any questions?
Feel free to reach out to us anytime !
Parth Jain Ajinkya Kurdukar
E-mail: parth@genesis.legal ajinkya@genesis.legal
Phone: 91-9833182600 91-9619834646
www.genesis.legal