Aidi — Founders agreement (Part II)
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In the first part of this article, we looked at the meaning of a founders agreement, why it is important and the key areas the agreement should cover. In the concluding part, we will examine how to create a simple founders agreement and a template you can use.
When it comes to creating a founders agreement, the process will look different for every startup. The approach will differ based on the company’s scale, size, scope and industry. However, there are common steps startups take when creating their agreement. It includes the following;
- Select a template:
Several VC firms, incubators and accelerators have templates you can use and so, there’s no need to create one from scratch. You can view different templates from different sources and choose the one best suited for your business.
- Begin with the easy sections:
A typical template will cover the mission and vision of the startup, roles, responsibilities, transfer of ownership, ownership structure, confidentiality, decision-making and dispute resolution, representations and warranties, and choice of law. This may look daunting for you and your cofounder and so, it is advised that you begin with the easy sections. Sections like the vision and mission of the company as well as your designated titles and accompanying responsibilities should be tackled first.
- Carefully work through the complicated sections:
When it comes to working out the hard parts of the agreement, you shouldn’t be in a hurry to get it done. You are advised to consult investors, fellow startup founders and industry peers to ensure that you are following the best practices. If possible, you can ask to see templates that the others used and get their input on certain aspects of their agreement that have helped them tremendously and inculcate it into yours.
- Consider running it through a lawyer:
You want to ensure that your agreement has covered all the necessary parts. Consider getting legal counsel and help to go over the terms and conditions one more time. Moreso, a lawyer will be useful in helping you construct the elements with the most liabilities including salary and ownership pieces as well as termination clauses.
- Finalize the agreement:
After adjusting the template to suit the business agreement, and getting legal counsel, set a specific date and time for all the cofounders to finalize by signing the agreement. Please endeavour to give them ample time to read, review and contribute to the agreement before the day of the signing. Ensure that every contribution is considered before the day of the signing.
Looking to create your first founders agreement? This template will help you with the process. Remember to consult a lawyer to help you go over the terms and conditions stipulated in the agreement.