1. Introduction
Startup law, a relatively new concept that refers to the process through which an entrepreneur develops an idea, establishes a company and expands operations, aims to ensure compliance with requirements and regulations for acting on a strong legal basis throughout a startup’s development and protection. A legal strategy is essential to protect an idea from its conception through production and overcome the possible issues that may arise while the product is being developed.
2. Legal Stages for Startups
The first step in ensuring a legal basis for a startup is the protection of intellectual property. To this end, pursuant to Law no. 5846 on Intellectual and Artistic Works and Industrial Property Law no. 6769, citizens have the right to register patents, trademarks, models and ideas and benefit from copyrights. Trademarks, designs, geographical indications, utility models, and patents are protected as industrial property while copyrights of works are protected as intellectual property. To protect their products, services, and works from infringement by third parties, entrepreneurs should define an intellectual property strategy early in the process and then file the necessary applications and registrations based on that strategy. [1] Ideas that are not yet concrete (i.e. transformed into works) are not patentable. However, it is equally important to protect products at the conceptualization stage in compliance with the legislation. A “Non-Disclosure Agreement” or a “Confidentiality Agreement” sets out the limits and terms of confidentiality to ensure that the information and documents identified as confidential in the agreement regarding a project, or a business conducted by the parties are not disclosed to any third party without the relevant party’s consent. Since a breach of confidentiality threatens startups at every stage, these agreements must be drafted specifically for the startup in question.
Confidentiality agreements drafted specifically for the intellectual property in question aim to protect ideas and startups, support a startup’s healthy and steady growth, maintain professional relationships with investors and customers, ensure legal compliance, facilitate due diligence in transactions, such as potential future investments, share sales, and loan purchases, and avert potential disputes and claims.
In addition to confidentiality agreements, other common agreements under startup law include term sheets/letters of intent, articles of association and partnership agreements, shareholders agreements, share purchase and sale agreements, e-commerce contracts, franchise/license agreements, employment contracts, and personal data protection agreements and protocols. In this respect, entrepreneurs are advised to plan ahead and be prepared for any regulations that may affect them before beginning business activities to minimize the chance of encountering any obstacles in the future.
The contracting stage is followed by the incorporation stage of the startup. The startup type to be chosen will depend on the venture’s field of activity, objectives, and qualities. The Turkish Commercial Code no. 6102 lists a limited number of corporation types in line with the numerus clausus principle. Accordingly, corporations may take the form of a joint stock company, a limited liability company, an unlimited liability company, a limited partnership, and a partnership limited by shares. Those corporations are subject to the Turkish Commercial Code and its secondary regulations, and they are divided into equity firms and sole proprietorships. Equity firms consist of joint stock companies and limited liability companies. In these firms, partners have limited liability. Sole proprietorships refer to unlimited liability companies and limited partnerships. In these types of corporations, partners have unlimited liability.
Joint stock companies and limited liability companies are the most common types of corporations in Türkiye. Among the aforementioned corporations, entrepreneurs often favor equity firms in consideration of liabilities. Another important consideration during the incorporation phase is that all these stages must be completed in cooperation with legal consultants. This process is also critical in that it includes significant stages such as company taxation, partner liability for debts, and the drafting of the articles of association. All these issues should be taken into account, and the most fitting startup type must be chosen to establish its legal basis.
3. Conclusion
In order for an entrepreneurial stage to be efficient and successful in today’s competitive business environment, a startup should have a strong legal basis from the outset by seeking professional counsel if needed. Entrepreneurs may navigate the process more effectively at critical points and avoid possible obstacles if they plan ahead for potential future legislation by consulting with professionals. The stages described here are helpful in establishing that legal basis. In conclusion, a legal strategy is necessary for startups and startup law to remain on the international agenda.
[1] https://www.mondaq.com/turkey/contracts-and-commercial-law/1164160/t%C3%BCrkiyede-giri%C5%9Fimcilik-startup-hukuku-ve-giri%C5%9Fimcilere-y%C3%B6nelik-te%C5%9Fvik-ve-destekler#_ftn2
