The document outlines key considerations for startup companies in Ireland, covering various aspects such as company incorporation, brand protection, share structure, employee equity, intellectual property, and legal agreements. It emphasizes the importance of planning, legal compliance, and proactive measures to avoid disputes and regulatory hurdles. Additionally, it provides guidance on selecting professional advisors and preparing for potential exits.

1. National Digital Research Centre
Launchpad
Peppe Santoro
@VentureLawIE
Venture Legal Services
Monday 20 February 2012
20 February 2012 1

2. Company Incorporation
• Get it done sooner rather than later
• Ireland is one of the world’s easiest places to incorporate
• Pointless to incorporate if you don’t fully use structure
• Minor ongoing compliance burden
• Subsidiaries / foreign companies
• If all comes to all, redomiciliation is possible
20 February 2012 2

3. Classes of shares
• Authorised v Issued Share Capital
• Nominal (aka “par”) v Market value
• Ordinary
• Preference
• Redeemable
• Coupon / Cumulative
20 February 2012 3

4. Brand protection
• Domain and company names are obvious first step
• Chinese (& Arabic?) character domains less so
• Registered business names? Purpose is compliance, not brand
protection
• Trade marks – useful if infringement or other issues arise
(McCambridges v Brennans – traditional but good)
• When? Phase 2 / 3 of growth
20 February 2012 4

5. Share issuance & registration
• This is a fundamental issue – get it wrong and you’ll spend a long
time putting it right
• Whether in an exit or a fundraising, shares are your currency
• Matters less what you’ve agreed in principle – share ownership
stems from what’s on the share register (register of members)
• Legal v Beneficial interests
• Options
20 February 2012 5

6. Accounting & company secretarial services
• Bookkeeping services (monthly/hourly) (to keep a handle on
routine financial transactions)
• CFO Services (monthly amount) (to provide an outsourced CFO
function or to support the CFO role)
• Company secretarial (flat annual fee – includes most
customary transactions and filings)
20 February 2012 6

7. Founders’ equity split
• The default is often equal but often that’s not appropriate
• Consider founder vesting from day one to make sure a member of
the original team doesn’t leave with a substantial equity early on
• Share vesting in Ireland is usually best done on a reverse vesting
basis (for tax reasons)
• Prepare for dilution and to be able to follow your
founder equity if at all possible
• Don’t let it become a divisive issue
20 February 2012 7

8. Employee shares
• Employee share allocations will almost always involve an
option scheme
• Make sure your option scheme fits within your overall share
structure
• Plan to allocate some shares to an option pool from the start
(15% is common but higher or lower can be appropriate)
• Again, make sure that these are subject to vesting
and do your best to mitigate adverse employment
law implications
20 February 2012 8

9. Intellectual property
• Distinct from brand identity – talking here about functional /
value based IP. It should (nearly always) vest in the company
• Usually includes copyright but may include patents, secret
know-how or other factors.
• Make sure you understand and defend what makes your
company special
• Some things you can defer but others you can’t:
eg public disclosures will make inventions
non-patentable in many jurisdictions
20 February 2012 9

10. Shareholders’ agreements
• Disputes among shareholders can be the death knell of an
early stage startup
• More important than the form and legal content of the
agreement is the thought process, collaboration and values
that underpin what you agree in principle.
• Some key issues to address: board representation, information
rights, drag rights, tag rights, preferences,
anti-dilution, pre-emption rights
• Interacts with articles of association
20 February 2012 10

11. Employment agreements
• Sometimes glossed over in the startup process (‘poor relation’ to
shareholders’ agreement etc.): budget time & money to get right
• If you wind up in a dispute you’ll spend more time looking at these
agreements than you ever anticipated – “a stitch in time…”
• The incidence of employment disputes in startups is much higher
than published cases would indicate
• Be mindful of how processes and procedures can impact
on form of agreements: always take advice before taking
disciplinary action
20 February 2012 11

12. Standard terms & privacy policies
• Can be pretty turgid stuff but get it done and out of the way
early and get it checked by a lawyer.
• Make use publicly available guidance such as that offered by
the Data Protection Commissioner
• Most companies look to their competitors when
designing the shape of their T&Cs and identifying
the issues they really want to cover (but please
don’t just do a direct cut & paste)
20 February 2012 12

13. Basic legal agreements
• B2C businesses will have lesser need for customer agreements
but may have material supplier, consultancy, infrastructure or
other agreements
• If your business is going to be B2B you’ll need bespoke
agreement and you’ll have to be flexible but you might still get
to propose terms (particularly if your business is novel)
• Getting to propose the first draft can be powerful
• Get legal help and try to standardise your approach
as much as possible.
20 February 2012 13

14. Mind the exit
• Once you’re up and running, everything you do should be with
one eye on the implications for your exit
• Items that can affect terms, availability or value of an exit
include: change of control clauses, uncapped indemnities,
equity held by industry, exclusive distribution arrangements,
key licensing/supply deals
• Honesty is the best policy – “sorry, that could really
hurt our exit” can be a really powerful negotiating
stance
20 February 2012 14

15. Regulatory approvals
• If business requires regulatory approval, your costs will be
higher, your time to market will be slower and your capital
needs will be greater
• Some common regulatory hurdles:
• data protection (registration and transfer outside EEA)
• pharmaceuticals or medical devices
• E-Money/Payment services
• Regulated professions (law, medicine, etc.)
20 February 2012 15

16. Forward planning
• Online resources to understand term sheets and related investment
issues and structures. In particular see Brad Feld’s Term Sheet Series and
Mark Suster’s Blog. The US NVCA has a detailed model term sheet and
other documents and the ABA has also published detailed guidance. Get
as much of this know-how as possible before you need it.
• Beware of timescales involved in raising investment
• Due diligence processes are relatively standard:
it’s possible to prepare properly far in advance
• Build professional relationships early and on the
basis of a long-term value proposition
20 February 2012 16

17. What to look for in professional advisers?
• Track record: all good advisers should be comfortable for you to talk to a
couple of existing or former clients and be able to talk
• Experience: it’s likely that there are professionals who will understand
your business and worth seeking them out
• Work plan: skilled practitioners will know the issues you are likely to
encounter and should be able to guide you accordingly
• Fee structure: expertise worth having usually isn’t cheap
but a qualified professional should be able to offer certainty
of fees (within reason) or at least absolute clarity
20 February 2012 17

18. Questions
20 February 2012 18

19. National Digital Research Centre
Launchpad
Peppe Santoro
Venture Legal Services
Monday 20 February 2012
www.venturelaw.ie
20 February 2012 19