Legal Basis of Entrepreneurship: Is It Allowed? Is It Prohibited?
These days, we are witnessing a notable surge in the popularity of entrepreneurship due to various factors. The quantity and scale of entrepreneurial activities are on the rise, both within Türkiye and across the world. The prevalence of entrepreneurship can be attributed to several factors, including increased globalization, generation gaps, different work expectations among generations, the recognition of time as a precious resource, and the drive to embrace time-saving practices.
It is crucial to stay abreast of each new concept that frequently arises in our everyday and professional lives to make its legal analysis and comprehend its legal basis, as required by the principle of legal certainty. Naturally, people would like to know and understand the opportunities and constraints within their respective fields of business. One of the most important of these constraints is law. Therefore, the legal basis of entrepreneurship and its implications should be analyzed.
Right from the inception of an idea, the entrepreneur, being the central figure in entrepreneurship, must abide by the applicable laws. Thus, they can effectively mitigate the risk of encountering substantial damages and wasting time due to potential legal issues or penalties in subsequent stages. For example, they should first assess whether their planned venture complies with the relevant laws, as embarking on a legally prohibited venture would render it futile and unfeasible from the outset.
The establishment of a legal basis for a venture should not hinder business activities. In this century, greater emphasis should be placed on the supportive and incentivizing aspects of law. Otherwise, law may be perceived as an institution struggling to keep pace with the dynamics of business life, emerging like a “ghost” at times. Therefore, the lawfulness of entrepreneurship should be assessed by posing the right question: The question of “Is it legally prohibited?” should be prioritized over the question of “Is it legally allowed?”, and the process should be carried out from this standpoint. The rationale behind this lies in the fact that our legal system upholds the principle of freedom of will, thus permitting activities other than those explicitly prohibited.
It is also crucial that a venture is legally protected from the start with appropriate measures. In situations where multiple entrepreneurs are involved, their ideas should be protected even from one another. Adopting this awareness and perspective during the process is one of the key factors contributing to achieving the desired goal in an entrepreneurial journey.
There are also numerous factors that need to be taken into account when deciding on the type of company where a venture will be undertaken, including: capital, shareholding, business structure, incentive opportunities, etc. To determine the right company type, alternatives should be evaluated and analyzed for each of these factors. The company’s articles of association to be drafted based on the company type should underline the significance of shareholding structure, privileged share system, share groups and the rights to be granted for the operation of the company where the venture takes place.
After taking the initial steps for a venture, ensuring confidentiality becomes the utmost priority, particularly during the processes of financing and offering options to personnel. As such, it is crucial to diligently handle the clauses and penalties of non-disclosure agreements, which are commonly encountered in practice. Failure to do so may result in the venture being unexpectedly undertaken by an investor with funding. Still, it can be discovered that the personnel who has breached confidentiality lacks the financial means to compensate for the resulting damages, meaning that the signing of a confidentiality agreement has been impractical from the outset. Hence, it is necessary to assess all these potential outcomes and develop a readily implementable roadmap.
Throughout these processes, it may be necessary to sign shareholders’ agreements, investment agreements, and preliminary agreements in the form of letters of intent in addition to confidentiality agreements. The successful completion of the process depends on determining if such agreements are binding, assessing the compliance of drag-along and tag-along clauses in agreements with Turkish Law, and seeing whether there are deterrent consequences in case of contract breach.
All the aforementioned processes entail a form of projection, and a meticulous, thorough, and professional evaluation of each aspect will contribute to achieving the benefit expected to be derived from a venture.