What is Co-Founders’ Agreement?
Document addressing relationship among startup founders by defining their rights and responsibilities.
Why is Co-Founders’ Agreement required?
To avoid legal pitfalls during early stages of startup and ensure proper understanding between cofounders, thereby reducing risk of disputes and misunderstandings.
Roles and responsibilities
Shareholding pattern, Vesting & Lock-in period
Future Stock Options
Issuance of new shares
Transfer of shares – restrictions and procedure
Decision making process for startup operations
Possible exit strategy for each cofounder or shareholder
Drafting Cofounders Agreement
A general list of understanding between startup founders is prerequisite before drafting agreement.
Noting main points on company’s letterhead can be a good start.
Engaging startup company lawyer to formally draft the agreement is strongly advisable.
Founders shareholder agreement, also known as SHA (stockholders' agreement) includes important provisions for growing startup business to next level. Provides for exit strategy of cofounders without dispute and minimum risk.