Start-ups have been present for a while now as an innovative way of doing business. Many successful companies began as start-ups, and their numbers are still growing. Also, big companies are trying to get back to being as agile as start ups or even establishing them for special purposes (spin offs). Let’s take a look at the “must take” legal steps, so a company can blossom as soon as possible.
Let’s start with company registration. The company should be set up and registered when the company’s responsibility is limited – for example LTD. According to research, LTD is the most common means of business in the UK. It is its own legal entity, it can enter contracts and employ. Because of limited financial liability of its leadership, the latter runs smaller risks, meaning riskier business decisions are taken, which can lead to better results and revenues, if executed correctly.
Next, I’d like to talk about the memorandum and articles of association. It is critically important for the memorandum to be drawn up reasonably, transparently, PRECISELY and clearly. No ambiguity or small print. Potential legal problems, far from being unknown to the modern business world and the creative and resourceful employees, can thus be avoided.
Shareholders’ agreement or another type of document that governs financial relations inside a company is also of utmost importance – it is in no one’s best interest for someone to decide they want a bigger revenue and singlehandedly fix it, possibly driving others out of the financial structure of the company. This option should obviously exist, but it should be explicitly foreseen, determined and put down in writing.
»Intellectual property assignment agreement«. The common thread of all (or, at least, most of) our blogs are intellectual property rights. Without complicating things unnecessarily, let’s just state it is quite urgent that a well-defined clause of copyright is (reasonably) essential to every contract, agreement or any other document in a company. IP rights should stay within the company – their value is enormous and (usually) grows with time. So, whenever anyone does anything for you, whether it is new logo, web page or product, make sure, all IP remains with you.
This set of intellectual property rights also contains the adequate intellectual property protection, whether it is a trademark, a patent or a model. When something is designed or created, you should register it at the Intellectual Property Office. This should be considered a (strict) rule, rather than an option. The moment you are in possession of a potentially profitable brand or product, you MUST protect it.
Imagine you have an idea for a new product you predict to be a hit, but you need an investor. You find one and set a meeting, where you show your future business partner your products, production and business plan for the product. They seem enthusiastic but inform you after a month or so that they will not be doing business with you. You disappointedly look for a new investor and side-line the project temporarily in hopes of improving it further. After a year, you see your own product advertised everywhere. Exactly as you designed it. And it truly is a HIT. And who developed it? That’s right, your first potential investor! An abhorrent business practice, for sure, but not unheard of. I write this to emphasise the importance of NDA’s (non-disclosure agreements) for the growth and development of a company. UTMOST IMPORTANCE (caps lock intended)!
It is furthermore critically important to have regulated and expertly written employment contracts and cooperation contracts (for subcontractors). Although the Labour Law determines essential and necessary components of an employment contract, the document itself remains a contract, meaning both parties at least partly determine the content themselves. Don’t hesitate to include everything in the contract. And I really mean everything. The damages to your company will be less significant if the first few candidates refuse to sign the contract due to all the included responsibilities and you are forced to look for the right candidate for a month longer, than if the first candidate realises after a year they can bilk you out of money or materials because that wasn’t taken care of to begin with.
The same goes for contracts with outside contractors. For example, a photographer, programmer, designer …
As mentioned above, contemporary business world is beaming with creativity on how to dupe the employer. Or the state. Or the employer and the state. And other employers to boot. And then we’re ahead, right? J
All jokes aside, even though the morality of business is often questionable nowadays, I still have lots of hope we will further develop, and if not develop, at least upkeep it.
So, don’t forget- a brand is born only when you have all legal and IP in place, at least minimum in the beginning-if you cannot protect your know how and trademarks/designs/patents/trade secrets, there is and will not be any brand.