No smooth sailing for start-ups

DECCAN CHRONICLE | JOHANNA DEEKSHA
Published Jan 17, 2016, 4:55 am IST
Updated Jan 17, 2016, 4:55 am IST
Maze of legal requirements haunts entrepreneurs.
(Representational image)
 (Representational image)

Chennai: It is the era of start-ups. The young are no more looking for jobs that will help them settle down quickly. Instead, they’re looking for ways to explore, innovate and excel. However, the road to setting up a start-up is seldom easy.

A major difficulty they face is legal hurdle. “Initially, your decisions are based on what others recommend. One advises you to hire an auditor or a lawyer but you can never tell whether the procedures we are fulfilling are right or enough because you don’t have adequate knowledge in the field,” said Krish Subramanian, CEO and co-founder, Chargebee Technologies.

 

Talking about his own experience as a start-up founder, Subramanian said he was once fined `200 for not fulfilling a legal requirement, “We were completely unaware about the fine and only came to know about it months later when the fine had gone into lakhs. When we gave the excuse that we were ignorant about the procedure, I was told “Ignorance is no excuse.” This was when I realised that we couldn’t afford to just leave all the work to our lawyers.” In a move to make legal procedures less complicated for start-up aspirants, Vakilsearch, an online legal advice portal, a first of its kind, is now allowing its start-up users to pay their legal fees in instalments. Hrishikesh Datar, CEO of Vakilsearch, said the new facility was created  to help more young companies grow at a faster rate, “The start-ups have to go through nearly eight to nine legal procedures before starting a business and the costs go up to Rs 30,000 to Rs 40,000. So, we are trying to reduce that burden for them because it is very easy to give up on the dream when you are being financially drained.”

While start-ups in India are a new fad, they have been springing up in other parts of the world like USA, but Indian entrepreneurs say it is less complicated to set up a company abroad than it is here.

“There are less stringent rules in USA. They do not require a company to be audited until 3-4 years after it is set-up. If the company can give an assurance that they wouldn’t make more than a standard amount of money, then they have the freedom to function as they wish for the first few years and only then be fully legally registered,” Subramanian explained. The same could be applied here as well. He suggested that the Central government relax their rules and ask for an initial upfront payment, but not pressurise them with stringent rules till they complete a couple of years.

While many entrepreneurs face such issues, there are also the exceptional few who don’t, like Kedar Kulkarni, co-founder of Hyperverge, “ This was my second start up. So, I didn’t have as many problems but I also came across a company that took care of all our legal work and only told us where we have to sign, but we are a software company so I feel it was easier.  I would expect hardware companies to have more of an issue with legalities.”

While web portals like Vakilsearch try and compensate for the lack of legal advice, Subramanian said there was a crying need for more support groups for start-ups to help them understand what needs to be done, “This is actually a chance for more start-ups to come up in this field of start- up support groups. They would absolutely flourish in this ecosystem.”

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