Pushya Mithra Advocate

Legal Groundwork for Early-Stage Companies

What legal documents should a startup in India have in place in its first year?

Pushya Mithra updated 4 min

What a first funding round asks to see

Fig. 6
Five foundation documents and the gap each one closes A stack read from the bottom upwards. Incorporation documents prevent having no structure to issue shares into. A founders agreement prevents equity walking out with a founder. Intellectual property assignments prevent the company not owning its own product. Hiring papers prevent claims from the people who built it. Statutory filings prevent a register that contradicts the cap table. later at incorporation Statutory filings filings that contradict the cap table Hiring papers claims from the people who built it IP assignments the company not owning its own product Founders agreement equity walking out with a founder Incorporation documents no structure to issue shares into
Diligence is largely an audit of decisions taken in the first year, and it reads from the bottom of this stack upwards. Each layer is cheap to put in place at the time and expensive to reconstruct afterwards, which is the whole of the argument for doing it early. Companies Act, 2013; Copyright Act, 1957

Founder arrangements left informal

Companies often begin between people who know each other well, on terms nobody wrote down. Equity splits, decision rights, vesting and what happens when someone leaves are the four points that later become contested. A founders agreement recording them, with vesting typically over four years and a one-year cliff, settles in advance the question that would otherwise be settled at the worst possible moment.

Intellectual property sitting outside the company

Under the Copyright Act, 1957 the author of a work is its first owner. An employee's work created in the course of employment ordinarily vests in the employer; a contractor's does not. Where a logo, a website or a codebase was produced by a freelancer without a written assignment, the company does not own it, and that gap is routinely identified in diligence.

The parallel gap is the trademark: a name used commercially for two years, and applied for only when a similar mark appears.

Hiring documents left incomplete

  • Offer letters and employment agreements setting out terms, notice and confidentiality
  • Assignment of intellectual property created during engagement
  • Contractor agreements that are genuinely contractor agreements, not employment in substance
  • Where options are offered, an ESOP scheme approved under the Companies Act, 2013

Statutory compliance deferred

Annual filings with the Registrar of Companies, board and general meetings, statutory registers, tax registrations and, where personal data is processed, obligations under the Digital Personal Data Protection Act, 2023 all accumulate from incorporation rather than from first revenue. Penalties for late filing are usually modest. The difficulty is that unfiled records surface during diligence as evidence of how the company is run.

Principal references

  • Companies Act, 2013
  • Copyright Act, 1957
  • Digital Personal Data Protection Act, 2023

This note sets out general information about the law as it stood on 8 June 2025. It is not legal advice, it does not take account of any particular set of facts, and reading it creates no advocate-client relationship. Law and procedure change; verify the position before relying on it.

Also in Insights