Tulsi Swamy, CFO, Prime Venture Partners, on how and why startups should make legal compliance airtight and make it a priority
For early-stage startups, the primary focus area is certainly the core product and service, and then comes building the right team. Achieving the product-market fit, growing the company’s ARR, expanding its area of service, and ensuring substantial returns to the stakeholders are among the next steps.
As time passes, other worries like competitors and market shifts also enter the spectrum. Unfortunately, the focus on good governance and legal compliance go amiss.
Tulsi Swamy, Chief Financial Officer at Prime Venture Partners, says,
“A good manager knows what seems unimportant today becomes a bigger demon tomorrow. Non-compliance may seem like a trivial attribute now when other aspects matter more, but it builds over time to appear as financial and reputational losses and often, complete shutdown in the worst-case scenario."
As a founder, you will never want such an inevitability. A financial loss might be the least of your problems, where non-compliance can also oust you from your own company, throw you into a decade-long legal mess, or simply evaporate your brand from the market. To ensure effective corporate governance and legal compliance from day zero, here are a few tips for all entrepreneurs, irrespective of your experience.
Watch the Prime Knowledge series with Tulsi Swamy brought to you by Prime Venture Partners, an early-stage VC fund investing in technology and product-focused businesses.
How to ensure airtight legal compliance?
All your registrations must be in place
In the rush to get your product into the market, it is easy to miss out on the paperwork that might be hiding somewhere. Make sure you fill out every registration requirement with PAN, GST, RBI, and SEBI to give your company a solid legal start.
Maintain all your records from the word go
Both your statutory and financial records need clear documentation. Employ software if required. Transcribe your board and shareholder meetings. When auditors arrive at your door, these will become your saviour.
Avoid ignoring your statutory filings
Companies have statutory obligations like GST and TDS filings, conducting audits, filling ROC, RBI forms, and so on. Depending on your business, make sure these are up to date and not delayed. A timely obligation is crucial.
Pay attention to HR laws
Take note of the mandates like POSH, which requires compulsory adherence when the number of employees in your company are more than 10. Also, look into other labour laws of the country and stick to them from day one.
How to ensure good governance?
Hire the experts
Make sure that you hire right experts like - company secretaries, accountants, auditors, and attorneys, who can help you set up the right processes and procedures. Also make sure you set aside the right budget for them. So, you have the time to do what is more fun for you, which is to build a company.
Allow a free flow of information within your organisation
If your tech team is unknowingly infringing on any trademark, it is the responsibility of your legal team to detect the happening and bring it to a halt. This is only possible when there is a clear channel of information flow within your departments. Put a system into place where each team can interact with each other without much hindrance.
Focus on risk detection and management
Risks can definitely come from non-compliance, but they can also take the shape of financial troubles, cyber-attacks, social unrest, and so on. All of these can lead to poor governance and you stay wary only with effective risk management.
Good governance and legal compliance
You cannot deny the responsibilities of these. Right in your early days when you are perfecting your product and brainstorming resource allocation, set a budget aside for good governance and legal compliance. The secret here is hiring the right people for the job, so that you are free to build your dream company.
(Edited by Megha Reddy)