Who doesn’t love an end of year round-up?! Whilst it might not be as interesting as a Top 10 album list, we thought a reminder of the A-List of legal challenges start-ups have faced this year might be useful Xmas reading.
If you’re building a tech company, understanding the constantly shifting sands of the law can be bewildering. Governance is boring, but without it you can’t raise your round, build your business or protect your assets.
Still doesn’t sound sexy? Sometimes you just have to suck it up and for lots of start-ups, the changing legal landscape can allow new business models to flourish.
So here we go …
1. Hiring people (and keeping them!)
Barclays ran a Fast Growth Tech survey earlier in the year. It found that small, fast growth firms (>20% growth) felt the following factors were most important for growth:
- Strong leadership (93%)
- Investment in technology or equipment (84%)
- Speed of decision making (80%)
- Investing in their workforce (84%)
- Attracting and retaining talent (30%)
The majority of these factors relate to talent, so item one on our list is the broad area of the legal challenges around finding and keeping great talent. Compliance with employment law can be a real struggle for start-ups. Without a dedicated HR department, or the money to outsource HR, staying up to date with employment law can seem almost impossible at times. Finding the right HR support – either internally or an outsourced solution – is key.
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2. Firing people
Employment law is one of the fastest moving areas of the legal landscape. Making sure you follow the right procedures when you need to slim down or move people on can be bewildering. As above, finding the best fit HR solution is an early need for start-ups.
3. Intellectual property
Protecting your startup’s IP has always been fundamental but IP-heavy start-ups are watching the EU landscape with interest. The EU is now introducing a single patent system across Europe – these changes, along with the creation of a single Unified Patent Court are probably the largest shifts in patent law in European history. The significance and scope of patent litigation in Europe are expected to increase substantially.
4. Pensions auto-enrolment
Even start-ups are beginning to have to phase in to the government’s pensions auto-enrolment scheme to boost employees’ pension savings.
5. Snoopers’ charter
The Draft Communications Data Bill is legislation proposed by the UK’s Home Secretary Theresa May. It would require (amongst other things) internet service providers and mobile phone companies to maintain records of each user’s internet browsing activity, social media, email correspondence, voice calls, internet gaming and mobile phone messaging services. Some startups that hold privacy as key to their business models have threatened to leave the UK if this sweeping suite of snooper regulations actually comes into force.
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6. Data protection
Another minefield for tech businesses is data protection and some start-ups have been keeping a close eye on the impending changes coming in from Europe. The General Data Protection Regulation has been now agreed; fine details are fairly scarce right now, but companies that get it wrong could face whopping fines of up to 4% of global annual turnover.
7. Consumer rights changes
B2C tech start-ups have been figuring out the Consumer Rights Act 2015 – clearer contracts and greater transparency around historically hidden charges have been addressed by this new legislation. It’s also now clear consumers will be compensated if any device, or other digital content they own, is damaged as a result of the problematic digital content that is downloaded.
8. FinTech – personal investments
On 6th April 2016, peer-to-peer lending investments will become eligible for ISA relief. These new FinTech platforms are hugely excited about the prospects of attracting a much wider pool of investors.
9. Electronic signing
Some startups are using the upcoming EU electronic signing regulations as part of their business models but these rules will impact all tech companies. From June 2016, your funding rounds (or other contractual arrangements) may not need wet ink on paper, saving everyone a huge amount of time and effort when getting multi-party contracts signed.
10. Smart contracts
What list of 2015 tech activities would be complete without the blockchain, which sneaks in at Number 10. Smart contracts are coming. These are self-executing contracts, stored on the blockchain, which nobody controls and therefore everyone can trust. A brave new world but there are lots of blockchain start-ups working on use cases right now.
Richard Goold (@gooldrichard) co-chairs one of the largest groups of tech lawyers in Europe (at Wragge Lawrence Graham & Co).