There’s a lot that goes into a business, which is why it is imperative to take effective measures to protect its every aspect. Legal documents are especially crucial in safeguarding your business from legal conflict, and in the case of disputes, these documents help maintain transparency and accountability.
It is easy to postpone various legal formalities in the early days of your business, favouring brand establishment and growth over security. However, it is always recommended to cover your legal bases first, and then proceed in other areas. To help you out, we’ve listed 8 essential legal documents you need for your business, to ensure you avoid expensive legal battles later.
1. Non-disclosure agreement (NDA)
Through the length of your business, you will have to work with employees, freelancers, contractors and other business partners. In the course of these collaborations, you will be required to share information that is critical to your venture. To safeguard this information, your collaborators must sign a non-disclosure agreement and thus maintain a confidential relationship with your business. An NDA will specify:
· Identification of the parties involved
· What is deemed confidential information
· The exclusions from confidential treatment
· How such information must be handled
· Who owns the information (your company)
· The term of the agreement
Some of the information that falls within the realm of confidentiality could include financial records, design ideas, project details, the client list, pricing strategies and more. Situations that warrant the signing of an NDA are sharing business information with a prospective buyer of your business, presenting a new product to a prospective buyer or licensee, or presenting a business idea with a potential partner or distributor.
2. Business plan
While this is not a legal document per se, it is a key document that you will need in the event you want to seek financing or sell your business. There is no fixed length to this document, although it should cover:
· An executive summary
· A company overview or business description
· Information about your product or service
· Your marketing strategies
· Company milestones
· An outline of your management with information about each member and their roles, and
· Your company’s financial plan
3. Meeting minutes
This is an official record of everything that has occurred at formal meetings (board and shareholders’ meetings). It documents what was discussed in the meeting as well as decisions made and actions that were taken, intending to inform those who were not present and to serve as a reference point for future decisions. Such minutes might have to be registered and publicly available. Here’s what is usually included in the meeting minutes:
· The meeting’s purpose and location
· Date and time
· The list of attendees
· The list of members unable to attend
· For each agenda item – decision, action items, next steps
· Voting outcomes, with a mention of who made motions, who seconded and approved with a show of hands, etc.
· Date and location for the next meeting
· Documents to be included in the meeting report
4. Employment agreement
Among the legal documents that you need for your business, this one should be reviewed by a legal expert specializing in employment law to ensure it complies with the law of the land.
The employee agreement is a legally binding document that outlines the terms and conditions of employment between you and the new employee. It lays out the rights and responsibilities of both parties for the duration of the employment period.
While the employment agreement is unique to every company, certain common elements may be included regardless of the company size, such as:
· Name and personal details of both, the employer and the employee
· Date of commencement of employment
· Job title and description
· Job responsibilities
· Number of working hours per week
· Nature of employment (full-time, part-time, contract)
· Salary structure or payment method (salary, wage, commission, per piece)
· Vacation allotment
· Probation period
· Performance reviews
· Restrictions on confidential information
· Dispute clause
· Acceptance of terms – It conveys to the user that by using the website or its services, they shall abide by its terms and conditions
· License to use – It details that the user has a limited right to use the website so long as they abide by its terms
· Cookies – Mentions how the cookies will store information and how they can disable these cookies in their browser settings to decline them
· Acceptable use policy – Provides the website’s prohibited usage
· User accounts – In websites where users may create an account, it informs that the user is ensuring that the details they provided are correct and that they are responsible for their account and password.
· Modification of site – It informs that you, the owner, can make any changes to the website without prior notice.
· Governing laws and compliance – This refers to the jurisdiction that applies to the terms mentioned.
· Rights and ownership – It informs your ownership of the intellectual property rights to your website’s content, apart from user content.
· Disclaimer – This could take various forms for varying websites. For example, a website that talks about health conditions could state that the content is for informational purposes and should not be taken as medical advice.
· Termination and modification – Informs users that the website can terminate users’ access to the website at any time, without prior notice.
· The information that will be collected such as names, email addresses, phone numbers, date of birth, IP addresses, etc.
· How this information will be collected
· How it will be used
· If the information will be shared with third parties
· How the information will be protected
· How to opt-out of data sharing
7. General terms and conditions for the sale of services/goods
Well-drafted general terms and conditions should act as a manual for doing business and as a reference that provides absolute clarity on what should happen in a given situation. Terms and conditions can also save a lot of money by addressing all issues at the outset, avoiding disputes later about what may or may not have been agreed upon, and chasing the clients in case of delayed payment.
Some key provisions of GTC include:
· Description of the conditions of services
· Payment terms
· Obligations of the service provider
· Obligations of the client (in particular, to make sure the client collaborates with the service provider)
· Term and termination
· Who shall own the intellectual property
· Limitation of responsibility
8. Shareholders’ Agreement
If you have an equity partner, it is key (but not mandatory) to document the terms of your partnership. A shareholders’ agreement is an agreement between the shareholders of a company, which generally sets out the shareholders’ rights, privileges and obligations, along with the foundation of how the corporation will be set up, managed and run.
Drafting this agreement early is a good way to minimise any issues which may arise later on by making it clear how certain matters will be dealt with. The best time to talk about this is in the initial stages when everyone is getting along and excited about the new business venture they are embarking on.
Here are some key elements of a shareholders agreement:
· Decision making – as a general rule, decisions can typically be made with the positive vote of a simple majority, but shareholders can decide what percentage is required for certain decisions (for instance fundamental decisions pertaining to the business structure).
· Restrictions on transfers and the ownerships of shares – this is of utmost importance in smaller businesses, when, as time goes on, personal circumstances of each shareholder can change and have an impact on the business. The remaining shareholder may want to have a say in potential shares transfer by the other shareholder(s).
· Financing of the company – this should describe how the company will access funds and whether the shareholders are responsible for financing the company.
· Exit strategies – the shareholders must provide for different exit strategies in the event that the shareholder can no longer be in the business together or if they believe that the company should be sold to a bona fide third party buyer.
The fact is, you cannot separate paperwork from your business. Everything needs to be legally documented, preserved and safeguarded because it is an aspect of your business that provides you with insight, protection, and a plan of action. So while you’re setting up your business, make it a point to build your organization on a strong legal foundation with these key legal documents that you absolutely need for your business.
About Bérengère Roig
I’m a Registered Foreign Lawyer and the founding partner of LPA Singapore. Bringing over 8 years’ experience to cross-border and domestic M&A, financings, commercial and restructuring transactions, and various corporate matters, I represent companies and individuals in their acquisitions, dispositions and joint ventures, in their investments and in their financing transactions and restructurings.
LPA Singapore is a Singapore-based business law firm. Bérengère and her team strive to protect the business interests of companies and deliver personalized advice. If you have any questions about the legal documents you need for your business or require their assistance with particular legal and business issues, please browse through their website or get in touch.
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