Co-Founders Agreement
It is indeed hard to pull a one man show. For a successful business, skills and resources of more than one person are required thus, business owners often look for a co-founder who can share the burden and multiply the growth of the business. An agreement that records the terms and conditions and forms an essential foundation of the business to regulate the relationship between co-founders including rights, obligations and duties towards the entity and towards each other is called the Co-Founders Agreement.
A Co-Founders Agreement should ideally be negotiated before the business starts when the parties are best able to find and record solutions as to how they will deal with the inevitable events that can occur in any business relationship. We strongly recommend that any business with Co-Founders should invest time to execute a Co-Founders Agreement between them to ensure that there is clarity of roles and responsibilities and there are efficient solutions built in to deal with founder exits without necessarily impacting the business, other co-founders and stakeholders negatively. Having assisted in many founder conflicts and exits, we are well aware of the issues that can arise and assist you to ensure that you have thought of all eventualities.
Some of the factors to be considered while drafting a Co-Founders Agreement:
- Ownership/equity stake in the business
- Effort, time, resources and capital being deployed by each of the Co-Founders
- Roles and responsibilities
- Vesting Schedule
- Treatment of shares on termination or exit of a founder
- Ownership of intellectual property
- Non-compete
- Non-solicitation
- Dispute resolution
At Burgeon Law, we understand that no two relationships, businesses or set of individuals are the same and in our view there is no such thing as a standard Co-Founders Agreement. We take time to explain concepts such as vesting schedule, reverse vesting, inactive shareholder buybacks, non-compete to our client and assist them with customized agreements to fit the requirements of the founders and the business.
