A well-structured Founders Shareholder Agreement is the cornerstone of any startup’s legal foundation. This document outlines the rights, responsibilities, and expectations of each founder involved in the venture. It serves as a roadmap for navigating potential disputes and ensuring a harmonious working environment.
To create a professional and effective Founders Shareholder Agreement, consider the following key components:
Free Founders’ Agreement Template PDF & Word
1. Identification of the Parties
Clear and concise identification: Begin by stating the full legal names of each founder involved in the agreement.
Business entity: Specify the type of business entity being formed (e.g., corporation, limited liability company).
2. Purpose of the Agreement
Define the scope: Clearly articulate the purpose of the agreement, emphasizing its role in governing the founders’ relationship and the company’s operations.
3. Capital Contributions
Initial contributions: Outline the initial capital contributions made by each founder, including cash, property, or intellectual property.
Ownership percentages: Determine the ownership percentage of each founder based on their contributions and any other agreed-upon factors.
4. Voting Rights
Voting structure: Establish the voting rights of each founder, including whether voting will be based on equal shares or weighted according to ownership percentages.
Special voting provisions: Consider incorporating provisions for special voting rights, such as supermajority requirements for certain decisions.
5. Founder Duties and Responsibilities
Obligations: Clearly define the duties and responsibilities of each founder, including their roles within the company and any specific obligations related to their contributions.
Time commitment: Specify the expected time commitment from each founder, particularly if there are any requirements for full-time involvement.
Salary and equity: Address the issue of founder compensation, including salary, bonuses, and equity awards.
Benefits: Outline any benefits that will be provided to the founders, such as health insurance or retirement plans.
7. Intellectual Property
Ownership and assignment: Determine the ownership of any intellectual property created by the founders before or during their involvement in the company.
Assignment: Specify whether the founders will assign their intellectual property rights to the company.
8. Exit Strategy
Buyout options: Define the terms for buying out a founder’s shares, including the valuation method and pricing mechanisms.
Vesting schedule: Establish a vesting schedule for founder shares, which determines when the founders will acquire full ownership rights.
9. Dispute Resolution
Mediation and arbitration: Specify the preferred methods for resolving disputes, such as mediation or arbitration, to avoid costly litigation.
10. Confidentiality and Non-Compete
Confidential information: Protect the company’s confidential information by requiring founders to maintain confidentiality.
Non-compete clauses: Consider including non-compete clauses to prevent founders from competing with the company after their departure.
11. Governing Law and Jurisdiction
Applicable law: Indicate the governing law that will apply to the agreement.
Jurisdiction: Specify the jurisdiction where any disputes arising from the agreement will be resolved.
12. Amendments and Termination
Modifications: Outline the procedures for amending the agreement.
Termination: Specify the circumstances under which the agreement may be terminated.
Additional Considerations:
Consider consulting with an attorney: While this guide provides a solid foundation, it is essential to consult with a qualified attorney to ensure your Founders Shareholder Agreement is tailored to your specific needs and complies with applicable laws.
Use clear and concise language: Avoid legal jargon that may be difficult for non-lawyers to understand.
Pay attention to formatting: Use a professional and consistent format, including headings, subheadings, and numbering.
Review and update regularly: As your company grows and evolves, review the agreement periodically to ensure it remains relevant and effective.
By carefully addressing these key components and considering the additional factors, you can create a Founders Shareholder Agreement that provides a strong legal foundation for your startup venture.
