Arohana Legal Advocates

Trade secrets are a valuable form of intellectual property that can provide companies with a competitive edge. Protecting trade secrets often involves the use of confidentiality agreements, also known as non-disclosure agreements ("NDAs"). These legally binding contracts establish a confidential relationship between parties, ensuring that sensitive information is not disclosed to unauthorized third parties. ⚡Key Provisions in Confidentiality Agreements ▶Definition of confidential information: The agreement should clearly define what constitutes trade secrets or confidential information. This may include formulas, patterns, compilations, programs, devices, methods, techniques, or processes that derive independent economic value from not being generally known. ▶Obligations of the recipient: The agreement must specify the recipient's obligations regarding the use and disclosure of the confidential information. This typically includes keeping the information secret and using it only for the purposes permitted by the agreement. ▶Time period: The agreement should state the duration of the confidentiality obligations. This can be a fixed term or may last indefinitely, as long as the information remains a trade secret. ▶Permitted disclosures: The agreement may allow for certain disclosures, such as those required by law or made to the recipient's employees or professional advisors who have a need to know the information. ▶Return or destruction of information: Upon termination of the agreement or at the disclosing party's request, the recipient may be required to return or destroy all confidential materials in their possession. To be enforceable, a confidentiality agreement must be reasonable in scope and duration. Courts will generally enforce agreements that protect legitimate trade secrets and do not unduly restrict an individual's ability to work or compete. In the event of a breach, the disclosing party may seek injunctive relief to prevent further disclosure or use of the trade secrets. They may also pursue damages, including any profits gained by the breaching party as a result of the misappropriation. The 22nd Law Commission of India issued a report titled "Trade Secrets and Economic Espionage" on March 5, 2024, recommending a new legal framework to adjudicate claims related to disclosure of trade secrets. It includes a draft bill titled "The Protection of Trade Secrets Bill, 2024," which aims to codify the acquisition, use, and disclosure of trade secrets, as well as legal proceedings related to them. While the necessity of codifying trade secret law to balance the interests of industry, innovators, and the public remains debatable, the Commission's effort to draft a definitive legislation on trade secret holders' rights, lawful acquisition/use, compulsory licensing, and confidentiality could prove to be formative, considering the importance of trade secrets and confidential information. #tradesecrets #nondisclosure #contracts

India, over the last decade, has emerged as a hub for startups. This growth has been commendable, and in this post, we explore the key statistics associated with the growth in the recent years. #startupindia #statistics

In this month's concept corner, we discuss the concept of divestitures, the types, process, and regulatory frameworks. #conceptcorner #companylaw

Your startup might not receive government recognition if you are not following the revised guidelines. In this post, we outline the recognition criteria for startups, as provided for by the Government of India under the Startup India Initiative. #startupindia #startups #recognition

Essential legal documentation that every SaaS startup must have: -> Non-Disclosure Agreements (NDA): NDAs are vital for safeguarding confidential information shared between parties. They create legally binding obligations to maintain secrecy and prevent unauthorized disclosure. -> Interim Access Agreement (IAA): IAAs grant temporary access to software or services pending the finalization of a comprehensive agreement. They ensure continuity of service while protecting the startup's intellectual property rights. -> Intellectual Property Assignment (IPA): IPAs transfer ownership of intellectual property created by employees or contractors to the startup. They ensure that the startup retains full control over its proprietary technology and trade secrets. -> Master Services Agreement (MSA): MSAs establish the general terms and conditions governing the relationship between a SaaS startup and its clients. They cover key aspects such as service scope, pricing, payment terms, warranties, and liability limitations. -> SaaS Subscription Agreement: SaaS Subscription Agreements outline the terms of access to the startup's software, including pricing, usage restrictions, data ownership, and termination provisions. They protect the startup's intellectual property while defining the client's rights and obligations. -> Service Level Agreement (SLA): SLAs set performance standards for the SaaS offering, specifying metrics such as uptime, response times, and support availability. They provide clients with assurances regarding service quality and reliability. -> Terms of Use: Terms of Use govern the use of the startup's website or application by end-users. They should cover acceptable use, intellectual property rights, disclaimers, and limitations of liability. -> Privacy Policy and Data Processing Agreement: Privacy Policies disclose how the startup collects, uses, and protects user data. Data Processing Agreements ensure compliance with data protection laws, such as the Information Technology Act, 2000, and the Digital Personal Data Protection Act, 2023. For SaaS startups, essential legal safeguards like tailor-made Terms of Service, comprehensive Privacy Policies, and ironclad User Agreements protect technology and build trust, forming a foundation for success.

In this short article, we share insights on structuring IP assignment clauses in a co-founder's agreement. A must read for startup founders. #startupfounder #startupindia #agreements

Don’t Turn Your Fintech Startup into the likes of FTX. If you are a fintech startup in India or a investor in one, it is essential to prioritize compliance, transparency, and risk management to build trust and avoid pitfalls. Here's a due diligence checklist to keep your fintech on the right track: ⚡Investor Due Diligence ▶Verify the business model, financial projections and valuation to ensure they are realistic and well-supported. ▶Assess the capabilities, experience and integrity of the founding team and key executives. ▶Evaluate the fintech's legal structure, contracts, intellectual property and compliance with regulations like the Information Technology Act, 2000 and the Specific Relief (Amendment) Act, 2018. ▶The fintech company must comply with relevant RBI regulations and guidelines, such as Know Your Customer (KYC) & Anti-Money Laundering (AML) Guidelines, Data Privacy, Cybersecurity, Payment System Regulations, P2P Lending etc. ▶Scrutinize financial statements, cash flow, revenue streams and burn rate in line with the Companies Act, 2013. ▶Identify any pending legal disputes, regulatory actions or reputational risks. ⚡Internal Due Diligence ▶Implement robust internal controls, risk management frameworks and governance practices as per RBI guidelines. ▶Maintain clear separation between different business entities and avoid conflicts of interest. ▶Regularly audit processes and technology to identify and remediate any gaps in compliance with the Payment and Settlement Systems Act, 2007. ▶Develop secure, scalable technology infrastructure with strong data protection measures. ▶Establish transparent financial reporting and maintain detailed records as required by the Companies Act, 2013. ▶Foster a culture of integrity, accountability and open communication with stakeholders. ⚡Red Flags to Watch Out For ▶Over reliance on a native token without adequate reserves or risk management. ▶Misuse of customer funds, such as lending them to affiliated entities without proper disclosure and violating RBI norms. ▶Lack of clear separation between different business entities, leading to conflicts of interest. ▶Weak regulatory compliance, inadequate licensing or failure to follow key regulations like the Foreign Exchange Management Act, 1999. ▶Overstating user numbers, transaction volumes or other key metrics to inflate valuation. ▶Overexposure to volatile assets, excessive leverage or concentration risk. Embedding rigorous due diligence into your fintech startup's DNA from the outset and maintaining it as you grow, while closely adhering to Indian laws like the IT Act, Companies Act, FEMA, and RBI guidelines, can help in building a sustainable, trustworthy business that unlocks the potential of financial technology while steering clear of the costly mistakes. With a steadfast commitment to transparency, compliance and robust risk management, your fintech can chart a course for long-term success in India's highly regulated market.

Byju's, one of India’s prominent ed-tech company, has recently encountered a series of legal challenges that highlight the importance of regulatory compliance, corporate governance, and consumer protection for startups. This post aims to analyze these legal issues and provide actionable insights for ed-tech startups to avoid similar pitfalls. Foreign Exchange Management Act (FEMA) Compliance: ❓Byju's faced allegations of FEMA violations amounting to ₹9,362.35 crore. ⚡Startups must conduct thorough due diligence and seek expert legal advice to ensure strict compliance with FEMA regulations, especially for cross-border transactions and overseas investments. ✔Maintain proper documentation and conduct regular internal audits to identify and rectify potential violations proactively. Debt Financing and Insolvency: ❓Byju's refusal to make interest payments on a Term Loan B (TLB) led to legal battles with lenders and insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. ⚡Startups should maintain open communication with lenders, provide timely financial reports, and proactively renegotiate loan terms if necessary. ✔Ensure sufficient cash flow to meet debt obligations and prevent defaults and insolvency proceedings. Consumer Protection and Advertising Regulations: ❓Byju's faced consumer complaints regarding aggressive marketing, mis-selling, and predatory lending practices. ⚡The Consumer Protection Act, 2019 prohibits unfair trade practices and misleading advertisements. ✔Startups must prioritize ethical marketing practices, provide clear and transparent information to consumers, and establish robust grievance redressal mechanisms. Corporate Governance and Shareholder Disputes: ❓Byju's experienced corporate governance lapses, including delayed financial reporting, auditor resignation, and board member exits. ⚡Shareholders sought to remove the CEO, citing governance lapses, which can lead to legal action under the Companies Act, 2013. ✔Startups must maintain a robust corporate governance framework, ensure transparency, timely disclosures, and proper communication with stakeholders. ✔Address investor concerns, follow best practices in governance, and ensure board independence to mitigate the risk of shareholder disputes. Best Practices for Ed-Tech Startups: ✅Conduct thorough legal due diligence to ensure compliance with all applicable laws and regulations. ✅Maintain a strong corporate governance framework with transparency, accountability, and timely disclosures. ✅Prioritize debt servicing and proactively communicate with lenders to avoid defaults and insolvency proceedings. ✅Adhere to ethical marketing practices, provide clear information to consumers, and establish effective grievance redressal mechanisms. Byju's legal troubles serve as a cautionary tale for ed-tech startups, emphasizing the need for a strong legal and ethical foundation. In ed-tech, it is necessary to be legally educated. #edtech #startups

In this short article, we delve into the laws for minority shareholders under Companies Act, 2013. Please read and leave your feedback in the comment section. #companiesact #shareholders

In this detailed guide, we cover the regulatory aspects and the evolution of online gaming industry, specifically focused towards games of chance in India. Please feel free to engage and leave a feedback in the comment section. #onlinegaming #gambling #esports #gamesofchance #gaminglaw