Introduction

Startups and Micro, Small and Medium Enterprises (“MSMEs”) are often born from visionary passion, disruptive innovation and the intrinsic drive to solve real-world problems. While founders primarily focus on exponential growth, agile product development and brand cultivation, the multifaceted legal complexities of operating a business are often overlooked, potentially hindering progress and slowing growth. One of the biggest challenges for startups and MSMEs is navigating and managing commercial and legal complexities effectively. Founders, often wearing multiple hats, might be unaware of the legal landmines hidden in early decisions like business structuring, Intellectual Property Rights (“IPR”) protection, legal and regulatory compliance hiring practices or investor negotiations. Mistakes at this stage, such as poorly drafted co-founder agreements, failure to protect intellectual property through IPR, missed compliance timelines, and the inability to identify and mitigate legal or contractual risks, can have catastrophic, even fatal, consequences for a company in the short, mid and long term.

Hiring a full-time experienced general counsel/head, may be an expensive proposition for  startups and MSMEs, considering the median salary of an experienced GC can exceed six figures annually. On the other hand, consistently relying on large law firms for routine legal matters can gradually strain legal budgets, as hourly billing models often offer limited cost visibility and predictability.

That’s where a Fractional General Counsel (“Fractional GC”) steps in as a strategic legal partner, embedded within the company’s operations and governance. A Fractional GC is an experienced legal professional who provides on-demand legal services to businesses, offering strategic guidance in compliance, contract management, risk identification, and mitigation. For early-stage companies with limited resources but bold ambitions of growth, hiring a full-time general counsel/head of legal is often financially and operationally impractical due to the premium compensation, difficulty in sourcing the right talent, and challenges in long-term retention.

More prevalent in the UK and USA, the concept of Fractional GC is gaining popularity in India, particularly among startups, early-stage ventures and mid-sized companies that require continuous strategic legal guidance but lack the resources to hire a full-time in-house legal counsel service. This model offers access to seasoned legal professionals on a flexible and retainership basis, allowing businesses to manage the legal affairs of the company efficiently and effectively while optimizing costs and maintaining operational agility in a rapidly evolving legal and business landscape.

This article (“Article”) primarily focuses on the first prominent ongoing litigation in India, ANI Media’s case against OpenAIi, as well as potential solutions to address these evolving legal challenges. Additionally, it analyzes similar legal disputes outside India.

Proactive Risk Management With Fractional GCs

A Fractional GC brings expertise to identify, access, and manage risks before they spiral out of control. By offering ongoing strategic legal advice, the Fractional GC  ensures that contracts, compliances, data privacy practices, HR policies, and regulatory obligations are in place and actively monitored.

For instance, in 2021, Flipkart received a ₹10,600 crore show-cause notice from the Enforcement Directorate (ED) for alleged violations of the Foreign Exchange Management Act (FEMA) between 2009 and 2015. The ED’s investigation focused on Flipkart’s use of WS Retail, a related party, to sell goods directly to consumers. This contravened FDI norms prohibiting foreign-funded e-commerce platforms from operating inventory-led models. ​This case underscores the importance of early legal foresight in startups. Flipkart eventually restructured its operations to a marketplace model, aligning with regulatory frameworks and restoring investor confidence.

Smart Legal Investment For Long-Term Business Resilience

Fractional GCs can integrate into internal teams and work collaboratively with top management as well as other departments like human resources, finance, marketing and sales. They have experience and ability to understand the company’s risk appetite, budget constraints and growth trajectory, so their counsel is balanced, pragmatic and timely. Startups often need to make decisions under pressure, and they need lawyers who aren’t stuck in legalese but can communicate clearly, make decisive judgment calls and move quickly. This is precisely the environment where Fractional GCs thrive, delivering flexible and strategic support.

Fractional GCs deliver seamless continuity and consistency as they know the operational fabric. This continuity builds trust, ensures expedited turnaround times and reduces legal spending that is otherwise squandered on repetitive onboarding or recurrent contextual briefings. This model acts like legal insurance for MSMEs with steady operations but no legal department, by ensuring expert legal coverage without inflating headcount or disrupting the company’s cash flow dynamics. They can also play an active role on the board, contribute meaningfully to key strategic decisions, and ensure access to the most suitable legal resources.

Legal Stewardship Across Critical Growth Phases

Startups and MSMEs need help avoiding pitfalls, and achieving transformational milestones. A seasoned Fractional GC can be instrumental in following key areas of practice.

  1. Contract Management: A Fractional GC ensures that contract templates, negotiation protocols, and review processes are robust and aligned with the company’s risk appetite, enabling clear and enforceable contracts that reduce the risk of disputes and litigation.
  2. Fundraising: From meticulous due diligence preparation to negotiating term sheets, understanding investor rights and avoiding dilution traps, Fractional GC ensures founders don’t inadvertently sign away too much or overlook crucial rights. For instance, several startups have avoided unfavourable liquidation preferences or loss of board rights by having a legal advisor flag red flags before signing.
  3. Partnership and Expansion: Whether cross-border agreements, reseller/partnership deals or sophisticated franchise structure, legal clarity can determine the success or break of growth initiatives. A Fractional GC ensures alignment with the jurisdictional regulations, commercial viability, and long-term goals, such as compliance with exchange control laws in international franchise deals.
  4. M&A Readiness: Even if an exit isn’t imminent horizon, building a comprehensive data room, organizing corporate governance records, managing equity grants, and ensuring IP assignments are in place from day one can increase valuation and buyer interest down the line. For example, ensuring that all shareholder agreements, IP assignments and board resolutions are in place.
  5. Employee Matters: Managing employment law, drafting contracts and handbooks, handling conflicts, and ensuring compliance with ever-evolving labour legislation becomes far more streamline with dedicated legal stewardship. For instance, maintaining up-to-date employment contracts, structured onboarding protocols, and clear internal policies becomes far more straightforward.
  6. Product Compliance: In an era dominated by data protection regimes, advertising laws and consumer rights, product launches can be derailed by regulatory missteps. A Fractional GC collaborates proactively with the product team to embed compliance into the product development lifecycle, ensuring regulatory resilience and for example, embedding data privacy safeguards and consumer rights compliance into the early product roadmap.
  7. Litigation Strategy: Rather than taking an adversarial stance, Fractional GCs encourage a dispute resolution mindset, emphasizing negotiation, mediation, and arbitration where possible to avoid lengthy litigation. For example, businesses integrating ADR clauses into contracts often settle faster, saving costs and reputational damage.
  8. Building Legal Teams: As companies scale, legal needs diversify. A Fractional GC can help assess when to hire in-house counsel, recommend recruitment profiles and establish internal processes.

A Fractional GC unlocks velocity and instils confidence by being embedded in strategic planning and execution. Founders of start-ups and MSMEs are often deeply involved in day-to-day operations. Therefore, having a GC enables them to delegate legal decisions confidently, freeing up their time to focus on growth.

Fractional GCs: Shaping Corporate Ethos & Investor Trust

The general counsels/head of the legal department often influence how the company behaves, from the tone and tenor of internal policies to how disputes are handled with the employees, customers, partners, and regulators. Beyond contracts and compliance, a Fractional GC helps cultivate and shape the legal ethos of the company. Having a Fractional GC on board can ensure governance hygiene, ethical business conduct and meticulous documentation, which is invaluable for startups seeking investments or eventual acquisition. Startups with a Fractional GC in place are seen as more mature and responsible.

Moreover, many Fractional GCs cultivate long-standing, strategic alliances with their clients. As the company matures and expands, these GCs transition from Fractional consultants to indispensable, board-level confidants, guiding pivotal decisions on capital-raising strategies, exit structuring and even complex litigation preparedness, if  necessary. In addition, Fractional GCs often take on pivotal roles such as training sales teams and internal stakeholders on high-impact legal provisions, like indemnity, limitation of liability, or data privacy clauses, that can be deal-breakers if overlooked. They ensure POSH compliance, essential when the GC holds a CXO-level title, reinforcing top-down accountability. In sectors involving cross-border dealings, FCPA and anti-corruption compliance are embedded into the operational fabric, preventing reputational damage and penalties.

Conclusion

The legal needs of startups and MSMEs are far too nuanced and multifaceted to be addressed on an ad hoc basis, yet hiring a full-time GC remains a prohibitive luxury for many. A Fractional GC firm seamlessly bridges this critical gap, offering seasoned, business-savvy legal expertise that scales in tandem with the company; by embedding legal strategy into daily decision making, the Fractional GCs protect business interests and actively enable their growth. For early-stage ventures and scaling enterprises alike, partnering with a Fractional GC isn’t just a legal choice it’s rather a business decision that reflects maturity, foresight and commitment to sustainable growth.

References:

Gaurav Gupta is the Founder and Managing Partner at Bridge Counsels & Dakshita Singh, is a final- year student of BA LLB at Guru Gobind Singh Indraprastha University, Delhi, and interned at Bridge Counsels.