Setting up a company can be a daunting process, particularly when you consider the amount of paperwork you have to go through to get it done effectively. One of the important ones is a founders’ agreement. Given the many other types of documents you need to draw up when forming a company, one may overlook the founders’ agreement, or simply come up with a shoddy one. However, it’s important to make sure that it’s free of any loopholes, since it just might be needed for legal reasons in future.
A founders’ agreement is a document that provides clarity regarding the company’s founders and the role in the business. This is one of the ways of ensuring that the business is viable in the long term, and that the risk of sabotage through infighting or other mechanisms is reduced.
One of the critical elements in a founders’ agreement is the role that each founder will play in the company. This is important to ensure that each individual sticks to their given role. In the absence of clear guidelines regarding this, you may find that some of the aspects of the company’s management are handled by too many of the founders, while other aspects are neglected. This element should never miss in any founders’ agreement.
In addition to that, the details regarding ownership have to be clear. For instance, if you have decided to divide the company into shares amongst yourselves, this should be very clear in the founders’ agreement. Issues such as the definition of a majority shareholder, the process share transfer and the fate of one’s shares in case they are deceased or decide to leave the company should also be included.