Armenia’s tech ecosystem is expanding rapidly - new startups are launching, expanding and engaging in cross-border collaborations. While we witness the fast grow of industry, legal aspects are often ignored. As a result, many startups unknowingly expose themselves to risks that surface later, especially during market entry, investor due diligence, or disputes.
Below are four legal issues frequently ignored by Armenian startups and ways to avoid them.
Unclear or Missing IP Rights
Some Armenian startups assume they have intellectual property (IP) rights to their products. While often such products are their main asset, legally, they are sometimes mistaken. Typical pitfalls include the absence of written IP assignment agreements or relying on freelancers who deliver IP products without transferring IP rights. Upon conducting legal due diligence investors will flag this immediately.
To avoid such risk, it is simply needed to sign IP assignment agreements with all contractors who develop the product, use Work-for-Hire clauses in employment agreements and conduct annual IP audits to make sure that proper IP rights are in place.
Improper Data Protection
Armenia has data protection laws in place and additionally, GDPR applies to Armenian companies, in cases of:
- the offering of goods or services, data subjects in the European Union; or
the monitoring of their behaviour as far as their behaviour takes place within the European Union (Art. 3(2), Regulation 2016/679, GDPR).
Common issues might be that there is no privacy policy or an outdated template, processing user data without consent or without other legal grounds and no data processing agreements.
This may cause termination of client contracts, or liability for data breaches.
To avoid such risk, it is needed to develop privacy policies and data processing agreements, conduct data-mapping to understand where personal data flows and train staff on handling personal data.
Absence of Founders’ Arrangements
Many startups begin informally, without clear agreements between co-founders.
Common issues might be that there is no founders’ or shareholders’ agreement and undefined roles and equity percentages.
This may cause disputes that block further investment or even dissolution of the company.
To avoid such risk, it is needed to prepare a Founders’ and/or Shareholders’ Agreement, as well as in the very beginning to determine and document decision-making and exit rules.
Poorly Drafted Client Agreements
Startups often work with foreign clients/partner using generic templates or agreements provided by client/partner, without even asking their lawyers to review them. Generally, client-provided or partner/provided agreements favor the client/partner side.
Common issues might be that the agreements lack the provisions on limitation of liability and confidentiality, no clear scope or deliverables.
This may cause financial losses or disputes.
To avoid such risk, it is needed to enter into a professionally drafted or reviewed Agreement that will comprise provisions on IP, confidentiality, representations and warranties, and limitation of liability with favorable legal and business terms for startups.
In conclusion, Armenian startups are innovative and fast-growing, however legal foundations matter just as much as technical and creative aspects. Addressing these four issues early can protect startup’s IP, improve investor involvement, reduce regulatory risks, prevent costly disputes and support international expansion.
If your company operates in IT, software development, AI, or digital services, it is a must to strengthen your legal framework.