The document outlines essential legal considerations for startups, including company incorporation, share issuance, intellectual property, and employment agreements. It emphasizes the importance of proper documentation and planning for long-term success, as well as addressing potential disputes among shareholders and employees. Additionally, it highlights the significance of understanding regulatory approvals and preparing for future investment opportunities.

1. DCU Ryan Academy for Entrepreneurship
Propeller Programme
Peppe Santoro
Venture Legal Services
Monday 6 February 2012
6 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
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3. Classes of shares
• Authorised v Issued Share Capital
• Nominal (aka “par”) v Market value
• Ordinary
• Preference
• Redeemable
• Coupon / Cumulative
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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
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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
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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)
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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
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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
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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
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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
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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
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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)
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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.
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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
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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.)
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16. Forward planning
• Many 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. Get at least some of
this know-how before you really need it because parts of the
process move quite fast when it happens.
• 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
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17. Questions
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18. DCU Ryan Academy for Entrepreneurship
Propeller Programme
Peppe Santoro
Venture Legal Services
Monday 6 February 2012
www.venturelaw.ie
6 February 2012 18