Pushya Mithra Advocate

Startup & Technology Advisory

Early-stage companies accumulate legal decisions faster than they document them. This part of the practice covers the papers a company is later asked to produce: the founders arrangement, the cap table and its paperwork, the option pool, the privacy policy, and the contracts the product is sold under.

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

Matters handled

Principal legal framework

Digital Personal Data Protection Act, 2023
Consent, notice and the obligations of a data fiduciary.
Companies Act, 2013
Share issuance, ESOP approval and the filings in a funding round.
Information Technology Act, 2000
Intermediary obligations, electronic records and signatures.
FEMA and allied regulations
Foreign investment reporting where subscribers are non-resident.

Questions that come up

Why do founders agreements include vesting?

Vesting ties a founder's equity to continued involvement over time, typically over four years with a one-year cliff. Without it, a founder who leaves in the first months retains full equity, which both burdens the cap table and is routinely raised as an issue in diligence by later investors.

What does the Digital Personal Data Protection Act, 2023 require of an Indian startup?

The Act applies to the processing of digital personal data in India. A business acting as a data fiduciary must have a lawful basis, ordinarily consent, give a clear notice of what is collected and why, process data only for that purpose, keep it secure, allow individuals to access, correct and erase their data, and publish the contact details of a person who can answer data-protection questions.

Is a term sheet legally binding?

Most term sheets state that they are non-binding, with specific clauses, usually exclusivity, confidentiality, costs and governing law, expressed to be binding. Whether a given term sheet binds depends on its wording and on the parties' conduct, not on the label at the top of the document.

This page describes the scope of the practice in this area. It is general information and not legal advice on any particular matter.

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