What is Partnership?

HR Policy for Startups- An Overview

In the rush of building a product and acquiring customers, many Indian startups often overlook the importance of formal HR policies. However, these policies are not just about bureaucracy or paperwork. They are tools to ensure consistency, fairness, and legal compliance.

HR policies balance employee rights and company objectives. They prevent arbitrary decision-making, reduce disputes, and clarify expectations for both employers and employees. They also provide frameworks for discipline, rewards, grievance redressal, and professional conduct, creating a workplace where talent can thrive.

While startups face constraints in time, budget, and HR resources, basic HR policies can go a long way in promoting stability, scalability, and a positive employer brand.

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Related Read: Templates for Startup Founders

Why HR Policies for Startups in India are Crucial?

Here’s why every Indian startup should prioritise HR policies from day one:

• Builds a consistent work culture: Written HR policies foster consistency across teams and leadership, even as the company grows or experiences turnover.
  
  
• Reduces misunderstandings: Policies help resolve or prevent conflicts between employees and employers by clearly communicating rights, responsibilities, and processes.
  
  
• Protects against legal risks: Indian labour laws, workplace safety regulations, and anti-harassment laws require compliance; having HR policies ensures your startup stays compliant.
  
  
• Drives employee morale and loyalty: Transparent policies around leave, performance, and compensation demonstrate that the company cares for its people, fostering trust and engagement.
  
  
• Defines company values and culture: HR policies codify expected behaviour and ethics, reinforcing the cultural DNA you want your startup to embody.
  
  
• Streamlines core HR functions: HR teams can better manage recruitment, onboarding, training, payroll, and performance reviews when guided by clear policy frameworks.

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Major HR Policies for Startups

Here are the key HR policies that Indian startups should prioritise:

Leave Policy

A Leave Policy outlines the various types of leave employees can avail themselves of, including:

• Casual leave
• Sick leave
• Paid time off (PTO)
• Maternity/Paternity leave
• Public holidays

Clearly define leave eligibility, accrual, approval processes, and encashment rules to avoid confusion.

Menstrual Leave Policy

Many progressive startups in India now include a Menstrual Leave Policy offering additional flexibility to female employees. Typically, this includes:

• A set number of days of paid leave per month or year specifically for menstrual health.
• A simple, stigma-free process to request this leave.

Performance Management, Appraisal, Rewards & Recognition Policy

A well-defined Performance Management Policy ensures that employees understand how their work is evaluated and rewarded. Include:

• Goal-setting frameworks (OKRs, KPIs)
• Appraisal cycles and review processes
• Criteria for promotions and salary hikes
• Recognition mechanisms (awards, bonuses, public appreciation)

Code of Conduct

A Code of Conduct defines acceptable behaviour and ethical standards at the workplace. Cover aspects such as:

• Professionalism and respect
• Anti-discrimination
• Anti-bribery and corruption
• Use of company property
• Conflict of interest
• Disciplinary actions for violations

Employee Joining and Exit Policies

Clearly outline onboarding and offboarding procedures:

• Documents and verification required upon joining
• Probation period terms
• Notice period during resignation or termination
• Final settlement process
• Exit interviews and knowledge transfer

Salary and Other Perks

Document your Salary and Benefits Policy, including:

• Salary structure (CTC breakup)
• Frequency of salary payment
• Statutory benefits (PF, ESIC, gratuity)
• Voluntary benefits (insurance, wellness programs, stock options)
• Reimbursement policies (travel, meals, etc.)

Sexual Harassment in the Workplace Policy

It is mandatory under the POSH Act, 2013, for Indian companies with 10 or more employees to have an Anti-Sexual Harassment Policy. The policy should:

• Define sexual harassment
• Outline the complaints process
• Establish the Internal Complaints Committee (ICC)
• Ensure confidentiality and protection for complainants

Regular Working Hours

A Working Hours Policy defines:

• Standard working hours
• Flexible working options, if any
• Remote work guidelines
• Overtime policies (if applicable)
• Break and meal times

Related Read: Startup India Scheme: Eligibility Criteria and Benefits

 Frequently Asked Questions

What is meant by Addition of Partner?

The addition of a partner involves introducing a new member into an existing partnership firm. This decision requires the unanimous consent of all current partners unless the partnership agreement stipulates otherwise. The incoming partner must possess the legal capacity to enter into a contract, as outlined in the Indian Contract Act, 1872. New partners bring specialised skills and industry expertise, enhancing operational efficiency. Their networks open doors to new business opportunities and markets. Overall, this flexibility enables firms to bring in fresh capital, skills, and expertise to support growth and expansion.

Process Of Addition Of Partners

The process of introducing a new partner involves several key steps:

1. Agreement on terms and conditions: The existing and incoming partners must mutually agree on aspects such as profit sharing ratio, capital contribution, roles and responsibilities.
   
2. Execution of deed of admission: A supplementary agreement containing the terms of admission should be drafted and signed by all partners, including the new entrant.
   
3. Capital contribution: The incoming partner must bring in the agreed capital.
   
4. Intimation to Registrar: Form 3 along with the prescribed fee should be filed with the Registrar within 30 days of the change.
   
5. Notification to stakeholders: The firm must inform its bank, tax authorities, and vendors/suppliers about the new partner's admission.
   

Documents Requirement For Addition of Partners

The following documents are typically required for the addition of a partner:

• A Digital Signature Certificate (DSC) is necessary for e-filing with the Registrar of Companies (ROC).
  
• Form 3 must be filed to update the LLP agreement, reflecting the new partner’s inclusion.
  
• Form 4 is used to notify the ROC about the appointment and obtain the partner’s consent.
  
• A Limited Liability Partnership Identification Number (LLPIN) is essential for all filings.
  These documents ensure the smooth onboarding of a new partner while maintaining regulatory compliance under the LLP Act, 2008. of Admission/Supplementary Partnership Deed
  

Advantages Of Adding Partners in Partnership Firms

The introduction of a new partner offers several benefits to a partnership firm:

• Capital infusion to support business growth and expansion
  
• Fresh expertise and skills to enhance the firm's capabilities
  
• Shared responsibilities and decision-making
  
• Potential for increased profitability and market share
  

What is meant by Removal of Partner?

Partner removal in a partnership firm or LLP occurs when an existing partner exits, either voluntarily or by a decision of other partners, as per the partnership agreement. The process must comply with the Indian Partnership Act, 1932, which allows removal only if expressly stated in the agreement and with the consent of all partners (except the one being removed). In LLPs, removal must also adhere to the Limited Liability Partnership Act, 2008 and LLP agreement terms.

Why Removal of a Partner May Become Necessary?

The removal of a partner may become necessary due to several reasons:

• Voluntary retirement or withdrawal
  
• Breach of partnership agreement or trust
  
• Incapacity or inability to perform duties
  
• Misconduct or negligence detrimental to the firm
  
• Insolvency or bankruptcy
  
• Death of the partner
  

Steps Involved In Removing a Partner

The process of removing a partner typically involves:

1. Serving notice: A notice of the proposed removal, specifying the grounds, should be served on the concerned partner.
   
2. Considering reply: The concerned partner must be allowed to submit a response to the notice.
   
3. Majority approval: Obtain at least 75% approval from the remaining partners through a resolution.
   
4. Executing deed of retirement/reconstitution: The change in partnership should be documented through a formal deed.
   
5. Intimating Registrar: Form 4 with the applicable fee should be filed with the Registrar within 30 days.
   
6. Settlement of accounts: The outgoing partner's accounts should be settled as per the partnership deed or mutual agreement.
   

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Section 31: Introduction of a New Partner

Section 31 of the Indian Partnership Act, 1932, governs the introduction of a new partner into an existing firm. It stipulates that a new partner can only be admitted with the consent of all existing partners unless the partnership agreement provides otherwise.

Rights and Liabilities of a New Partner

Upon admission, the new partner becomes entitled to share in the profits and is liable for the losses and debts of the firm from the date of their entry, unless agreed otherwise. They have the right to access the firm's books of accounts and to participate in the management of the business. However, they are not liable for any acts of the firm before their admission, unless they expressly assume such liability.

Section 32: Retirement of a Partner

Rights of Outgoing Partner

Section 36: Right to Conduct a Competing Business

Unless restricted by an agreement, a retiring partner has the right to carry on a business competing with that of the firm and to advertise such business. However, they cannot use the firm's name or represent themselves as carrying on the firm's business.

Right To Share

The retiring partner is entitled to receive their share of the firm's assets, including goodwill, as per the terms of the partnership agreement or mutual understanding. They also have the right to share in the profits of the firm until the date of their retirement.

Section 37: Entitled to Claim

The outgoing partner has the right to claim their due share from the continuing partners. If not paid outright, they are entitled to interest at 6% per annum on the amount due.

Liabilities of Outgoing Partner

Section 32(3) and (4): Liability to the third party

The retiring partner remains liable to third parties for all acts of the firm until public notice of their retirement is given. They are also liable for any obligations incurred by the firm before their retirement unless discharged by agreement.

Section 32(2): Agreement of Liability

The retiring partner and the continuing partners may agree to discharge the retiring partner from all liabilities of the firm, but such an agreement is not binding on third parties unless they are aware of it.

Section 33: Expulsion of a Partner

A partner may be expelled from the firm by a majority of partners if such power is conferred by an express agreement between the partners. The power to expel must be exercised in good faith. Unless agreed otherwise, the expelled partner can claim the value of their share as if the firm were dissolved on the date of expulsion.

Section 34: Insolvency of a Partner

If a partner is adjudicated as insolvent, they cease to be a partner from the date of the insolvency order. Their share in the firm vests with the Official Assignee or Receiver appointed by the court. The firm is dissolved unless the solvent partners buy the insolvent partner's share and continue the business with proper intimation.

Section 35: Death of a Partner

In the event of a partner's demise, their legal heirs or executors step into their shoes. The firm dissolves from the date of death unless the partnership deed provides for continuity. The deceased partner's share in the firm's assets, goodwill, and profits is settled as per the partnership agreement or mutual understanding.

Section 38: Continuing Guarantee Revocation

The estate of a deceased or insolvent partner, an expelled or retired partner, is not liable for the firm's debts contracted after their death, insolvency, expulsion or retirement. A continuing guarantee given to a firm or a third party in respect of the firm's transactions is revoked as to future transactions by any change in the firm's constitution.

Conclusion

Changes in the composition of a partnership firm through the addition or removal of partners are significant events. While new partners can infuse capital and expertise, the exit of partners due to retirement, expulsion, insolvency or death can impact the firm's continuity and harmony. The Partnership Act provides a framework for inducting and removing partners. The terms of entry and exit should be clearly documented in the partnership agreement to minimise disputes. Intimations to the Registrar and third parties should be made promptly. With some foresight and planning, partnership firms can manage changes in their constitution smoothly and continue their business journey.

Frequently Asked Questions

What is Form 11 and How to File It? 

Form 11 is an Annual Return of LLP. Every LLP in India must file with the Registrar of Companies (RoC) under the Limited Liability Partnership Act, 2008. It serves as a comprehensive summary of the LLP's management and structure for the financial year.

Here’s what Form 11 LLP typically includes:

1. General Information:
   
   • LLP Name.
   • LLP Identification Number (LLPIN).
   • Date of Incorporation.
2. Partner Information:
   
   • Names and details of designated and other partners.
   • Changes in partnership during the financial year, such as additions, resignations, or reassignments.
3. Contribution Details:
   
   • The total contribution received by the LLP from partners.
   • Contributions made by individual partners during the year.
4. Declaration of Compliance:
   
   • A confirmation that the LLP has met its statutory obligations during the year.

Steps to File Form 11

Filing Form 11 is a straightforward process. Follow these steps to ensure compliance:

1. Download Form 11:

Visit the Ministry of Corporate Affairs (MCA) portal and download the latest version of Form 11.

2. Fill in Basic Details: 

Provide the LLP’s basic details, including:

• LLPIN.
• Date of Incorporation.
• Business activities during the financial year.

3. Enter Partner Information:
   
   • List all designated and non-designated partners.
   • Include details of any changes in partnership, such as additions or removals.
4. Attach Supporting Documents:

Upload any supporting documentation, including agreements or resolutions, if applicable.

5. Certify the Form:

Ensure the form is digitally signed by one of the designated partners using a Digital Signature Certificate (DSC).

6. Submit on MCA Portal:

Upload the completed form and pay the prescribed filing fee. Fees depend on the LLP’s total contribution as per the LLP Agreement.

Due Date for Filing Annual Return (Form 11)

The due date for filing Form 11 is May 30 every year, covering the financial year ending on March 31.

Important Note:

• Filing Form 11 is mandatory regardless of whether the LLP has started its business. Even dormant LLPs are required to submit their annual return.

If you don’t file before Form 11 LLP’s due date, you can be penalised, so it's crucial to adhere to the timeline.

Additional Fee (Penalty) for Belated Filing of Annual Return (Form 11)

Failure to file Form 11 on or before May 30 can lead to significant financial penalties and legal complications. 

• A penalty of LLP form 11 late fee of ₹100 per day is imposed for each day the filing is delayed.
• The penalty has no upper limit, which means prolonged delays can result in substantial fines.

Continued non-compliance may lead to the LLP being marked as inactive by the RoC. While the designated partners may face disqualification from holding similar roles in other companies or LLPs.

What Are The Prerequisites?

Before filing, ensure that you’re fulfilling certain Form 11 LLp requirements:

1. The LLP is registered and has an active status on the MCA portal.
2. A valid DPIN of the Partner.
3. A Digital Signature Certificate (DSC) is available for at least one designated partner.
4. All pending compliance forms, such as Form 3 (LLP Agreement), have been filed.

What Are the Documents to be Submitted Along with Form 11?

Depending on the changes or updates during the year, the following documents are required for Form 11 LLP submission:

1. List of Partners:

A detailed list of designated and other partners, including their roles and contributions.

2. Contribution Proof:

Evidence of the capital contributed by each partner during the financial year.

3. Supporting Agreements:

Copies of resolutions or amendments to the LLP Agreement, if applicable.

4. Additional Documents:

Any other documents as required by the MCA portal based on the LLP’s activities.

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Important Aspects to Note While Filing Annual Return for LLP

While LLP annual filling might seem straightforward, there are key details and considerations that can make a big difference. Overlooking these aspects could lead to errors, delays, or unnecessary penalties. To help you navigate this process smoothly, here are some important points to remember while filing your LLP’s annual return.

1. Accuracy of Partner Details:

Ensure the names, roles, and contributions of all partners are correctly listed, as discrepancies can lead to rejections or penalties.

2. Difference Between Forms:

Do not confuse Form 11 for LLP with Form 8, which deals with the financial health and solvency of the LLP. Both must be filed annually.

3. Digital Signature Validity:

Verify the validity of the Digital Signature Certificate (DSC) before submission to avoid technical issues.

Certification in Annual Return (Form 11)

Certification plays a crucial role in the filing of Form 11 (Annual Return) for an LLP. It ensures that the information provided is accurate and compliant with the statutory requirements. 

While the form can be filed by the designated partner(s), certain conditions require additional certification by a practising professional, such as a Company Secretary.

When is Certification Required?

For LLPs meeting certain financial thresholds, certification of Form 11 by a professional ( Company Secretary) is mandatory:

• If the LLP’s contribution exceeds ₹50 lakhs, or
• If its turnover exceeds ₹5 crores,

Frequently Asked Questions