Trade License & Trade License Renewal


To carry on the particular trade or business, permission is required to be obtained by applying for trade license. Trade license gives permission for only those trade related activates for which it has been obtained and not other than that. Before starting manufacturing activities by an establishment it is required to obtain fundamental license from the license department.
Trade license is applied on the basis of the premises therefore it has to be obtained for all locations from where the business activity is carried out. An application has to be filed prior to the 30 days of commencement of such activities by the establishment. Its main purpose is to regulate trade in the country along with the safety guidelines prescribed by the government.
Trade License Requirement
§  Its main purpose is to regulate improper trade activities and to ensure that citizens are not adversely affected by health hazards & nuisance.
§  It provides safeguard.
§  It ensures that activities are carried out in accordance with the rules & regulations prescribed by the government.
§  It helps in building image of the establishment that no illegal activity is carried out.
Trade license is obtained from concerned State Government or Municipality or corporation where the place of business is situated. State government lays down the provisions of trade license and besides this, it is also responsible to manage and regulate the trade within a city.Each state has its own set out of rules and regulations in relation to trade license. Therefore before applying for trade license an applicant must be aware about the rules & regulations pertaining to trade license and also the jurisdiction under which an applicant operates. There are different names of this license in different states like in Maharashtra it is known as Gumasta License. Trade license prevents establishments from penalty & prosecution. In India, carrying business activities without obtaining trade license is an offence punishable.
Documents required for Trade License
§  In case of company or LLP, PAN card of establishment;
§  Cancelled cheque with bank statement;
§  Certificate of Incorporation of company (MOA & AOA);
§  Address proof of establishment;
§  ID proof and address proof of all directors and their passport size photographs;
§  Front-Face Photograph of the establishment and display of goods;
§  Site plan of the applicant.
Trade License Application Scrutiny
On receiving the application for trade license renewal, concerned officer shall verify the suitability of business and possibility of danger or nuisance. After scrutinizing an application, trade license is issued. In some of the states, in person verification is done by the concerned authorities. This process usually takes around 10 to 15 days after submission of an application.
Trade License Renewal
After the issuance of trade license, it is required to be renewed on annual basis. Trade license is issued for the period of one year in some states however an application can be made for license renewal at the end of the each year on the payment of prescribed renewal fees.
Source url - http://enterslice.over-blog.com/2018/06/trade-license-trade-license-renewal.html

What are the term and condition of legal notice


Ubi Jus Ibi Remedium is Latin for “For every wrong, the law provides a remedy”.
If a right is provided by the law, then you may approach the court if it is infringed or invaded. The court shall meet the ends of justice and provide relief in the most appropriate manner.
In day to day transactions, we come across situations where we feel our legal rights have been infringed. Such situations may be of various natures, for example:
1.      A deficit in services provided to the consumer,
2.      Manufacturing defect in the goods sold to a consumer,
3.      Non-payment of the amount due to any individual, company, firm etc for the services rendered,
4.      Irregular termination of services of an employee by the employer;
5.      Wage dispute at the workplace;
6.      Family disputes;
7.      Property disputes;
8.      Rental or Tenancy disputes etc.
When faced with such situations, approaching a legal forum is thought to be the best idea. But, a legal professional shall always suggest serving a ‘Legal Notice’ as the first step.
A Legal Demand Notice is a formal communication to any person or entity informing about the infringement of the legal right and the intent of recoursing to legal forum against them if the required steps are not undertaken within a reasonable time as mentioned. It serves as both an opportunity and a warning.
A Legal Notice is of great importance and evidentiary value before the Courts, if they approached for resolving the dispute.
What details should a Legal Notice constitute?
The legal notice must be complete, detailed and correct in all respects to give appropriate information to the served party.
1.      The notice must be able to provide information regarding the
a.      Details of the parties involved,
b.      details of the transaction,
c.      all the important dates with respect to the dispute,
d.      details of the commitments made by the parties and their fulfillment/ breach,
e.      the cause of action,
f.       any oral or written communication undertaken by the parties prior to the said legal notice with respect to the dispute,
g.      the monetary value involved in the dispute,
h.      details of the receipts drawn,
i.       the relief sought, example- compensation with interest, replacement of goods etc,
2.      It is necessary to grant a time frame in the legal demand notice as an opportunity to make good the damages/ loss suffered or to fulfill the liability as per the law. The time frame may either be a reasonable period ranging from anything between 15 days to 30 days or as per specific provisions of any Act with respect to the nature of the dispute. Example- for cheque dishonor cases, a 15 days period from the date of service of the notice has to be mandatorily provided to the accused.
3.      The notice must be duly signed by the client and the lawyer if has been engaged. A legal notice is preferred to be sent via Registered Post or Courier and the acknowledgement along with the copy should always be retained.
4.      The legal notice must be drafted with extreme care for the choice of words, language of the content as well as the facts being mentioned. A good measure of caution is required to be taken since a legal notice is of evidentiary value before the court and any incorrect or misleading facts may land you in trouble and not fetch the results as expected.
It is for this reason that a Legal Notice should be sent through an Advocate who has expertise in the subject matter and will be able to foresee the consequences of all the aspects of the Legal Notice.
5.      A reply to legal notice is not mandated under any law. Thus, after dispatch of the aggrieved person has to track down the status of any action undertaken by the person served and if no steps have been undertaken as per those mentioned in the Legal notice, the appropriate legal forum must be approached well within time.  
Source url - http://enterslice.over-blog.com/2018/06/what-are-the-term-and-condition-of-legal-notice.html

Memorandum of Understanding


Memorandum of Understanding (MoU) is an agreement between two or more parties laying down the terms and conditions of the transaction, also mentioning the rights and obligations of the parties. It forms a part of the initial discussions of the party with respect to the transaction. It constitutes the major features of the oral discussions and negotiations between the parties. It may also include other aspects like financial, authorizations, duration etc.
What are the basic features of Memorandum of Understanding?
1.      It is a preliminary document formalizing the first level of discussions between the transacting parties.
2.      It lays down the common understandings between the parties.
  1. It is a reference document for the drafting of the final agreement.
  2. This enables a flexible negotiation between the parties giving them a scope to examine every aspect and consequence of the terms decided upon.
What are major contents of Memorandum of Understanding?
1.      Identification of the parties with specific details with the authorized signatories mentioned.
  1. Purpose and specific goals of the parties. The parties must be clear in the objective of the transaction being carried forward.
  2. Duration of such an agreement, either with the time period mentioned or the specific dates. It may also provide the circumstances in which MoU shall stand terminated.
  3. Meetings and reporting that are mandated by a mutual understanding between the parties. The plan of meetings and reporting to be made should be clear to enable a flaw-free business structure.
  4. Financial Considerations which form the part of the transaction and their form. Also mention the authorized personnel that shall make the financial decisions. The pattern of recording financial transactions can also be specified.
  5. Management including the appointment of persons appointed to take care of day to day operations with respect to the transactions, elaborating the role, responsibilities, and remuneration.
  6. Signed by authorized persons with dates.
Is Memorandum of Understanding legally binding in India?
According to the Indian Contract Act, 1882, all agreements are not contracts. An agreement becomes a contract only when it fulfills the following:
a)      made by the free consent of parties;
b)      between parties which are competent to contract;
c)      for a lawful consideration;
d)      with a lawful object, and not expressly declared as void, and
e)      With an intention to create a legal relation.
A Memorandum of Understanding will fulfill all the other conditions but if it does it constitute the intention of parties to create a legal relationship; there shall be no binding effect of such MoU. The intent of the parties has to be construed from the language, content and material provisions of the MoU. A MoU shall create rights, duties, and obligations of the parties only when the clauses can be deciphered in such manner as creating a legal obligation.
Such distinction has t be drawn whether the parties intend MoU to be an informal agreement, an agreement to contract or a legally binding agreement. Parties shall be bound by it only when MoU intends to create such obligations. A specific clause as to binding or non-binding nature of the MoU is considered best for explaining the enforceability and binding nature.
Source url - http://enterslice.over-blog.com/2018/06/memorandum-of-understanding.html

Master Service Agreement


If you are planning to operate any business/ project or provide services in future it is preferable to execute Master Service Agreement (MSA) which is created between two or more parties where both parties agree to most of the terms that govern the future transactions. It stands as strong foundation for a business to be conducted in the future.

There are various sectors/ areas under which this type of agreement can be executed such as HR, Finance, Marketing etc.
Typically, the MSA outlines the business relations in general terms which focuses more on terms of payment, description of services, duration, dispute resolution etc,.

Purpose of this agreement

A Master Service Agreement is generally a long-term agreement which outlines the scope of services and other related terms in detail in a ‘Statement of Work’ before starting the business.

Benefit of MSA

§  Execution of Master Service Agreement is one of the time effective method as the terms specified in the agreement related to work is not repetitively negotiated
§  It maintains a business relationship between the parties which results in consistent work without any hassle in future.
§  Written description of the services is always a welcome option to avoid the disputes
§  By inserting the liability clause, it protects the latter parties from loss caused by the fisrt party

What Does A Master Service Agreement Usually Cover?

Before entering into Master Service Agreement, first of all the parties need to focus on the below factors:

  • What and how the companies will do the business together;
  • Risk that the parties might face during the operation of business;
  • Who will be liable for the loss incurred.

Listing of below mentioned potential items in advance avoid the uncertainties in future. So, following are the terms that should be focused to incorporate in MSA
1.     Scope of the services and statement of work

This is one of the important clause that must be incorporated in MSA which defines what services will be provided and not provided as defined precisely in the statement of work. The more detailed consulting contract is, the lesser will be the chances of dispute in the future.

2.     Terms of Payment:

Parties agree to a certain amount of price as a compensation of service in the statement of work avoids the situation which could lead to disputes in future

3.     Reimbursement of Expenses

While executing a agreement ensure for incorporating a clause for reimbursement of all the expenses reasonably incurred in the performance of the services provided by the consultant.

4.     Duration and it renewal

The time duration of the project upto which the parties will complete should be provided which can be renewed on mutually acceptable terms.

5.     Dispute resolution or mediation

The parties should always pay careful attention to insert a dispute resolution clause in MSA that requires both the parties to pursue mediation and dispute resolution mechanism in case of dispute arises in future.

6.     Liability Clause

This clause if stated clarifies that to what extend parties will be liable for the misconduct because of their carelessness or negligence. 

7.     Termination Clause

In case of situation of breach of confidentiality, or conduct of illegal activity, the services will be terminated. Also willful termination can occur with a prior written notice by the parties. By inserting this clause the parties shall be relieved from future performance of their rights and obligations under this agreement .

8.     Confidentiality

This is the most important clause of any agreement which clearly spells out that all confidential information related to financial status, projections etc of the company shall not be disclosed without their knowledge and consent. In case if disclosed under the requirement of law/regulation or any order of any court/ authority it should be clearly specified in the agreement.

9.     Governing Law
Agreement must provide that the agreement shall be governed by and interpreted in accordance with the laws prevailing and subsisting in India.

Source url - http://enterslice.over-blog.com/2018/06/master-service-agreement.html

What is the necessity of service level Agreement


A service level agreement is a formal agreement executed between two parties. This agreement will clarify the services which shall be provided by the service provider. SLA is mainly a contract between a service provider and other party (its customer) which describes the services and performance standards.
Service Level Agreement Components
Service Level Agreements (SLAs) will consist the following elements:
Ø  Description of the services
Ø  Reliability- Time of availing the service
Ø  Responsiveness and effectiveness of the service
Ø  Process & procedure of service
Ø  Process of monitoring the Performance
Ø  Description of Penalties in case failure to meet obligations
Ø  Circumstances under which terms of the service level agreement be waived
Service level agreement gives the clarity of expectation and provides benefits to both parties. A clause can be there regarding incentives and penalties and besides this it will also indicate the time when service provider is entitled to terminate the agreement.
Business entities usually outsource wide range of services. At the time services are outsourced, business entity enters into a Service Level Agreement (SLA) which explains the relationship among both the parties. SLA covers everything related to business relationship. SLA can be entered with the consultant or freelancers. It is very beneficial up to the services are rendered.
SLAs are periodically reviewed and updated by the Service providers which explain if there is any addition made or modification of existing services or if there is any change in regulatory environment.
Source url - http://enterslice.over-blog.com/2018/06/what-is-the-necessity-of-service-level-agreement.html

Why execution of Shareholders Agreements crucial for Company


Execution of shareholders agreement fills the gaps in the clauses not covered under the company’s constitution, through which corporate assign personal rights to Shareholders

Execution of shareholders agreement is always a good idea to prevent and resolve problems between shareholders and the company. In a properly-executed shareholder agreement it is clarified as to what extent they can enjoy the rights and makes clear what managements’ role is. 

Learning about Shareholders agreement

Shareholders agreement is an agreement between the sellers (Company) and buyers (Shareholders) of the shares that confer rights and impose obligations over and above those provided by the regulatory laws.

The Shareholders agreements provide for matters such as restrictions on transfer of shares, forced transfers of shares, nomination of directors for representation on boards, quorum requirements, majority rights available to certain shareholders at the board level or the shareholder level.

Shareholders agreements are important because it sets out all the terms of sale into writing which prevents misunderstandings.

Benefits of entering into Shareholders Agreement

·       Shareholders agreement provides specific information on the transfer of shares and rules governing the transfers.
·        Executing agreements allows businesses to raise revenue for the organization.
·        Shareholders agreement explains special tax treatments the shareholders may receive for the transfer.
·        Executing shareholders agreements allows the purchaser to claim dividends on their investment.
·        A dispute over various issues could be resolved between the purchaser and seller by executing shareholders agreement.

How the shareholders agreement can well drafted?

It is essential that some consideration be given in deciding the terms of agreement. Your shareholders agreement should contain at least some of the following provisions:
1.Information And Inspection Rights:
The shareholders should be given the right to have access with the information related to company’s financials.
In addition to the information and materials to be provided, shareholders should be provided with the right to visit the office for inspection at its own cost
2.Nomination of Directors
The holders of certain percentage of shares should be given the right to nominate Director on the Board or any committees of Board

3.Management related matters:
The holders of certain percentage of shares should be given the right to make the decisions with respect to control of the management like setting up the quorum for the board and shareholders meeting, passing of board and shareholders resolutions.
4.Representation & Warranties 
While executing the agreement the company should set out some of the representation-
§  like the agreement is legal, valid and binding;
§  the company will notify of any material changes made in the agreement or
§  approvals for the execution of this agreement have been obtained from the Governmental Authorities 
5.Right of first refusal
Entering this clause in an agreement is useful in case where the existing shareholder in the Company decides to leave, other shareholders will have the option to purchase the shares before they're sold to the outsiders.

6.Buy-back Rights: 
These give the company the right to claim back the shares of a certain shareholder on withdrawal or death of the shareholder.
7.Liquidation preference

The same clause used by venture capitalists in their term sheet, should also be a part of shareholders agreement where on the occurrence of an Exit Event of the company, the proceeds will be distributed first to the Investors before the other shareholders in order to recover their investment.

8.Exit Options
The Company shall provide an exit option  to the Investors in the agreement.

9.Confidentiality
This is the most important clause of any agreement which clearly spells out that contents of the Transaction Documents shall not be disclosed to any outsider without their knowledge and consent. In case if disclosed under the requirement of law/regulation or any order of any court/ authority it should be clearly specified in the agreement.

It is to be mentioned that the above clause of shareholders agreement are not exhaustive and totally varies according to the industry.
Source url - http://entersliceindia.webstarts.com/blog/post/why-execution-of-shareholders-agreements-crucial-for-company

Investment Term Sheet


The first and most important step before making investment into the company is to decide: What terms should be covered in my Term Sheet?
There is always a dilemma in the preparation of the term sheet as to whether to draft a negotiated, detailed, précised term sheet, or to draft a term sheet where significant terms will be negotiated at the time of due diligence.
What is term sheet?
A term sheet is a document which sets out the broad parameters of an investment made by an angel investor or venture capital investor to the startups
The term sheet compiles up the discussions and defines the terms on which the startup owner and investors have agreed to informally.
Binding Provisions of Term Sheet
Nothing in the term sheet is legally binding on the parties except for the covenant of ‘Confidentiality and No-Shop Provisions.
Confidentiality:
This is the most important clause of the term sheet where all the financial data related to investment is disclosed to the investors. Therefore, insertion of this clause protect the company’s sensitive information from being revealed by the potential investor to third parties.
“No-Shop” Provisions :
A “No-Shop” provision prohibits the company from exploring alternate financing with any third party for a short span of time.
Further, company must make sure that this provision should not be are too restrictive or extend for too long a period of time, especially when the company is in need of funds.
Basic Provision of Term Sheet

Term Sheet reflects the following:
1)     Type of Security:
One of the initial terms that must be included in the term sheet is the type of security whether investment is made in common stock or preferred stock etc,
2)     Price of security:
The price per share will be based on the capitalization and valuation of the company.
3)     Valuation : This clause referred in the investment term sheet includes:
                 i.             Pre-money valuation: the investor’s estimate of what the company is worth before his or her investment of funds. 
               ii.             Post-money valuation: the expected value of the company after investment of the proposed funds. 

4)     Capitalization:
Investors analyze their investment in a company based on the capitalization of the company. Whereas the capitalization is based on the total number of shares which are outstanding plus all of the shares that are expected to be outstanding if options and warrants were exercised and convertible securities were converted.

Below are the List of the Key Terms of A Term Sheet

1.   Consideration for the money invested:  

The investors often prefer to invest in convertible preferred stock. It gives them a preference over common shareholders in respect of dividends and upon a sale of the company gives them the option of converting into common stock if the company is successful. 

2. Type of stock given:  The stock allotted to the investor must be defined clearly in the term sheet. The investors are more preferable to invest in preferred shares that entitles them to vote and will receive preference in the payment for their stock in the event of the company’s liquidation which is why the investors found it as an attractive investment.

3. Non-solicitation: Most of the venture capital investors insist on inserting a lock-up period clause where the company would be prohibited from accepting an investment or acquisition proposal from any other party during the preparation process of term sheet.
4. Involvement of Board of Directors: The investors insist on the right to appoint at least one member to the company’s board who are responsible for setting company policies, approving financing etc, in return for its capital investment. So, it is necessary to include the details of involvement of investors in board of the company.
5. Prevention of Equity Dilution:  The venture capital firms will require an anti-dilution clause insertion to the term sheet to protect them from future sales of shares at a lower value. 
6. Tranches:  In cases where the investors’ invest in tranches to the startup then the period of tranches must be specified in the term sheet as it reduces both the founders and investor's risk.
7. Right to buy shares back:   Venture capital investors always want to protect their financial interests in a company. Therefore Venture capital investors normally insist to include right of first refusal (ROFR) clauses in their term sheets. This clause allows existing owners to reclaim shares that are about to be sold to a new investor and prevent ownership division in company.
Source url - https://enterslice1.wordpress.com/2018/06/21/investment-term-sheet

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