Best Practices Running Start-Up Board Meeting

Every start-up has to learn to run formal board meeting after a certain stage. As handling regular communications with investors is a crucial task for a start-up founder, board meetings provide a reliable and consistent opportunity for the same. Do not treat them like a routine update session as the same shall add significant value to the company. While reporting on past is vital, meetings should be forward focused on what you should do.

Based on our experiences and multiple articles by experts, here are some best practices we suggest that entrepreneurs can adopt to run effective board meetings.

Before The Meeting

Schedule the meeting well in advance. Ensure everyone is agreement on the frequency of meetings – monthly or quarterly. Prepare an annual schedule at the beginning of each financial year indicating the months and ensure it is in every member’s calendar. Finalize the exact dates at least a week before and send a formal notice with a detailed agenda. This gives everyone come prepared.

Assemble a well-structured agenda. It’s ideal to always use a consistent structure for each meeting so the participants know what is coming. Avoid surprise announcements at board meetings as the board members need ample time to decide. In general, you should have an ongoing dialog with your board members outside the board meetings, particularly, lead investors.

Prepare a good board deck. Content should be simple and avoid jargons. Use bullet points. Targets and deliverables need to be specific and someone has to be accountable for the same. Treat board-meeting preparations an opportunity to pull yourself out of the day-to-day routine and take a look at your company. However, don’t spend too much time in making everything look perfect.

Who’s joining and what are focus topics? It’s better to not bring in the entire top management team as the same will divert meaningful discussions. Instead, pick one or two focussed topics which requires immediate attention and invite the concerned executive. This will ensure there is enough time for a meaningful discussion. It is both better use of management’s time and also ensures your team gets exposure to the board.

During The Board Meeting

Keep it concise. Better to have a board meeting for two or two and a half hours. But with ample time to provide updates and to deliberate the same. Having a short meeting also ensures everyone stays concentrated and that the questions and discussions are relevant and efficient. Long board meetings lead people to disengage and discussions start to drift.

Be in control. Keep in mind you are in charge of managing the meeting. Tell the board what the main thing you want out of the meeting and ask specifically & directly for Board’s help, wherever, required. You can decide what you want to discuss. If you feel the discussion is drifting too much or is irrelevant it’s ok to take control and out rightly cut off the topic or discussions. The board meeting should end when it is to end and not extend beyond the schedule.

Invite debate & discussion. The best board meetings are not a one-way communication but rather a meaningful discussion. The topics should not only include updates from the management team but also strategic questions you want to discuss with the board. Every board has its own dynamics, but make sure all the people are encouraged to express their opinions.

Immediately appoint a person to takes notes. Ideally you should have a template to fill out to make things easier. The notes/minutes should be circulated among investors and they should be approved at the next meeting. Save all the notes and board deck – you will need to provide them to investors during due diligence at the next round of fundraise.

After The Board Meeting

Follow up. During the meeting, you can assign tasks for board members (introductions you need, help with recruiting, market studies, etc.) After the meeting you should follow up with the concerned board members who were assigned during the meeting.

Keep everyone in the loop. Make sure you send the minutes of the meeting to all investors. You should also send updates / MIS reports to the board members and all investors.

The above processes may be totally onerous but at least you know what needs to get done. Discuss with your lead investors and get their input in ensuring everything is done right.

We at LexHive ensure that Board Meetings are not a pain that an entrepreneur has to endure but a big value-add process to his / her start-up.

Legal Compliance: 5 Basic Law Categories for Start-ups and Small Businesses

Your idea validated by experts & well-wishers and converted into a business model. And now, you are ready to launch your own start-up. The early stages of setting up a new business will be time consuming for the founders – developing the product/service, building the team, structuring the company, attracting investments, key partnerships and marketing plans. Amid all this, essential activity, legal compliance related activities takes a back seat leading to legal and financial woes in the long run. Hence, it is equally important and critical that you understand the legal basics and to help you be legally compliant at the initial stages, we have compiled FIVE basic legal categories required for start-ups and small businesses.

  1. Company Formation & Compliance

While starting up, first thing to be finalized is the legal format of your start-up.  Will it be a Limited Liability Company or Private Limited Company or Partnership Firm? However, there are pros & cons in every format. Choose your format based on factors like the business objectives, nature of business, long term goals, etc. There are various incorporation requirements that you need to complete while setting up your business and also ensure periodical compliances, more specifically, with the Registrar of Companies (RoC).

  1. Taxation & Accounting

Accounting and Taxation are another vital legal basics must for you as an entrepreneur. Taxation is both Direct and Indirect. With regard to indirect taxation, a lot has changed with the rollout of Goods and Services Tax (GST) a unified tax structure. You have to make periodical online filings along with payments. On the direct tax side, Income Tax returns, Tax Deduction at Source (TDS) and payment of the same are your annual tasks.

  1. Dispute Resolution & Contract Laws

As you start, you are to have various form of relationships with multiple businesses and individuals – co-founders, employees, customers, vendors, investors, etc. You need to formalize these relationships to ensure clarity and reduced uncertainties.  When you are signing an agreement or contract both parties are agreeing to certain conditions and at times the same can quickly turn into disagreements and result into a dispute. You have to have some knowledge on the contract laws that will help you in dispute resolution.

  1. Intellectual Property

First and foremost, owning Intellectual Property Right will be the USP of your products or services and it will help creating a high entry barrier for your business. This will have a positive and substantial impact in your marketing. In fact, owning an Intellectual Property is an asset and carries commercial value. It will also help you a lot while fund raising. You should remember that assessing IP is not just about protecting the work you are doing, but it also to check if someone else has an IP for similar work.

  1. Labour laws

When you are established as a company and have hired people to work for your organization, you are subject to several labour laws regardless of the size of the organization or number of employees. However, with regards to labour laws, start-ups registered under the Start-up India initiative can complete a self-declaration (for nine labour laws) within one year from the date of incorporation in order and get an exemption from labour inspection.

The existing dynamic statutory environ has made knowledge and compliance to applicable laws a challenge for entrepreneurs particularly those at the nurturing stages. It is best to outsource a legal counsel to advice and oversee your legal compliance tasks to ensure impeccable compliance in an economical way.

Need legal compliance services for your business? LexHive Consultants has a boutique of services that can help you be legally compliant!

GST Return Filing

At last, we are all set to rollout Goods and Services Taxes (GST), considered as biggest tax reforms in the recent past. The implementation date for the same is July 01. Every transaction has to be reported from the seller to recipient of any single goods and services. An extensive IT system has been deployed by the Government to cope up with huge influx of data, called the GSTN (Goods and Service Tax Network) that will house all the information of sellers and buyers together, collaborate the details submitted and even maintain 3 registers for future reference and anytime reconciliation. A robust reporting structure has been put in place. Let’s understand the various types of GST returns, forms and the process of filing.

GSTR-1

The return filing of normal taxpayers starts with this form. The taxpayer records the outward supplies of goods and services. To be done by 10th of the succeeding month, this form has details such as GSTIN, Name, Annual Turnover, Filing Period, Taxable Outward, Tax Liability and Tax paid.

GSTR-2A

This return is available on the 11th of the succeeding month to recipients for validation. The validation can be done upto 15th of that particular month.

GSTR-2

This form is of all inward supplies of goods and services as approved by the recipient and auto populated with details of GSTR-2A. It has details such as, GSTIN, Name, Filing Period, Inward Supplies, Debit/Credit Notes, TDS/TCS Credits, Tax Liability and Tax paid. The final date is 15th of the succeeding month.

 GSTR-1A

The return shall be auto-populated after filing of GSTR-2 on the 15th of the succeeding month. The supplier shall have the choice to accept or reject the changes made by the recipient. Following such acceptance, the GSTR-1 shall be revised to such extent.

GSTR-3

This return is auto prepared by 20th of the succeeding month. It will have the details of all outward as well as inward supplies of goods and services as furnished in GSTR-1 and GSTR-2. After considering both the details, GSTN will determine the input tax credit availability or the amount of tax payable. It will have details, such as, GSTIN, Name, Filing Period, Total turnover, Taxable & Non-Taxable Turnover and Inter & Intra State Supplies/Receipts,

GSTR-9

This is the annual return, which the taxpayer has to file by 31st December of the upcoming financial year. It is nothing but the accumulation of all 12 monthly GSTR-3 of the taxpayer. It would also include the amount of tax paid during the year, including details of exports or imports.

Apart from the above, there are exclusive returns for composition tax payers, non-resident tax payers and e-commerce portals.

Any business, manufacturer, trader or service provider, has to file these mandatory returns. While, the automation is an attempt towards process simplification, it may also complicate matters for businesses without requisite resources.

LexHive Consultants help in computing payments and ensuring on-time payments & return filings.

Intellectual Property Rights and Funding

It is well established that intellectual property (“IP”) assets – including patents, trademarks, and copyrights, among others – generate what economists would refer to as “excess profits” to their owners, causing relatively high capitalization compared to other asset classes.

For a Start-up entrepreneur one of the challenges is CAPITALIZATION – raising money in the market. Uniqueness, competitive advantages, barriers to entry and other such factors are significant players. Investors are generally, but justifiably skeptical on the above.

The questions that arise most at the earliest stages include:

  • How will it reflect on our chances of getting funded on favorable terms?
  • Will it build formidable barriers to entry?
  • Is it worth investing in the IP process?

But keep in mind; one of the key considerations for investors is whether a company can protect its unique characteristics or processes that generate revenue. Therefore, an important step in the funding process is to build safeguards for those characteristics. This is the foundation of Intellectual Property Rights (IPR). The relevant IPR protections to most entrepreneurs are: Patents and Trademarks.

In “A Startup’s Guide to Intellectual Property,” the Iowa Innovation Council summed sums up quite well: “A company’s intellectual property portfolio is of significant interest to angel investors, venture capitalists, and during an IPO. Startups need to invest in intellectual property to make the business more attractive to investors. Companies need to take proactive steps to protect intellectual property by filing patent applications where appropriate, registering trademarks and copyrights, and taking appropriate steps to protect trade secrets. By taking steps early on to protect intellectual property, a company provides comfort to investors, builds credibility, and creates a solid foundation that can be capitalized on later.”

Unfortunately for many start-ups, it can be difficult, complex and expensive even to find out if their product or service is unique enough to qualify for protection.

For an outline of the types & processes see our Trademark & Copyright.

 

Transition to Goods and Services Tax (GST)

The Goods and Services Tax (GST) is supposed to be the biggest reform in India’s indirect tax structure since the economy began to be opened up 25 years ago. It was first recommended in the year 2004 by Kelkar Task Force on implementation of Fiscal Responsibility and Budget Management.

Objectives of GST:

  • Subsume all indirect taxes at the centre and the state level
  • One-Country-One-Tax
  • Reduce the cascading effect of taxes on taxes
  • Increase productivity and transparency
  • Increase tax-GDP ratio
  • Reduce/Eliminate tax evasion and corruption

So, how GST differs from the current regimes and how it will work?

Currently, everyone in a business transaction (includes manufacturers, whole-sellers, retailers & purchaser) has to pay variety of taxes when they get engaged in a transaction of an item. But, once GST comes into effect, it is expected that all central and state level taxes and levies on all goods and services will be subsumed within an integrated tax having two components: a central GST and a state GST. The end-consumer will bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

As mentioned by the Ministry of Finance, “GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.”

How is it important to the economy?

  • The GST regime seeks to subsume the all the taxes levied by the Central Government and the State Governments into a single one.
    • Central Taxes: Central Exercise, Service Tax, Central Surcharges, Central Cess.
    • State Taxes: VAT/Sales Tax, Entertainment Tax, Luxury Tax, State Taxes, Cess)
  • States and the Centre will have concurrent power to levy taxes. As of now, Centre mainly collects Service Tax, while the states tax the retailing process. With GST their roles will be extended.
    • Centre Government will levy Integrated GST (IGST) on inter-state supply of goods and services. On intra-state supply of goods and services, the Central Government will levy Central GST (CGST)
    • State Governments will levy State GST (SGST). Import of goods will be subject to basic customs duty and IGST.
  • Taxes will be on consumption and not on production.The final consumer will bear all the taxes, and this tax will have Centre’s as well as the States’ share in it.

 Getting ready for GST

In view of recent developments, it appears that the Government is set to meet the target of implementing the GST with effect from 1 April 2017. Introduction of GST will necessitate review and change of tax positions, supply chain, ERP system, business processes and accounting, among others. GST is a tax trigger that will lead to business transformation.

Hence, as we approach GST implementation timelines you need to be proactive to set in place appropriate processes to handle the change and be GST ready.

  • Understand key areas of impact in your business
  • Prepare the transition roadmap and align relevant teams
  • Change in business processes to align to the new tax regime
  • Continually track policy development regarding GST and update proposed scenarios
  • Identify any areas of adverse impact and prepare contingency measures
  • Identify issues and concerns needing representations to the authorities and develop a strategy for effective advocacy
  • Update of ERP
  • Training of all personnel on new processes

LexHive’s Roles

 Renegotiate the pricing with vendors, if needed

  • Alignment of all major contract terms and tax clauses with GST
  • Review existing contracts with vendors to analyze the impact
  • Assisting in maintenance of requisite statutory registers of supply and procurements, input credits
  • Timely filing of monthly and annual returns
  • Identifying impact on financials, working capital, credit chain, concessions, etc
  • Making requisite changes to ERP modules, MIS reports, etc
  • Training sessions for employees on the changed scenario, record keeping, integration & compliance

 LexHive Advantage

  • Our team comprises specialized & experienced professionals and advisors, including former government officials
  • We maintain a strong working relationship and have access to various government departments and agencies
  • An all-inclusive collection of service offerings to help ensure smooth transition across functions (tax, IT, supply chain, accounting)
  • With a diverse clientele, our in-depth experience cuts across multiple business segments including manufacturing, service and trading

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