A Founders Shareholder Agreement (FSA) is a legal document that outlines the terms and conditions governing the relationship between the founders of a company. It serves as a blueprint for the company’s structure, ownership, and decision-making processes. A well-drafted FSA can help prevent future disputes and ensure that the company’s goals are aligned with the founders’ interests.
Key Components of a Founders Shareholder Agreement
Free Founders’ Agreement Template PDF & Word
1. Company Information:
Name: The official name of the company.
Jurisdiction: The state or country where the company is incorporated.
Purpose: A concise statement of the company’s objectives and mission.
2. Founders and Ownership:
Founder Identification: Names, contact information, and contributions of each founder.
Equity Ownership: Allocation of shares or equity ownership among the founders.
Vesting Schedule: A plan for the gradual vesting of shares over time, often tied to employment or company performance.
3. Voting Rights:
Voting Power: Allocation of voting rights among the founders.
Special Voting Rights: Any special voting rights or restrictions, such as supermajority voting or veto powers.
4. Decision-Making:
Management Structure: Outline of the company’s management structure, including roles, responsibilities, and decision-making authority.
Board of Directors: Composition, powers, and responsibilities of the board of directors.
5. Intellectual Property:
Ownership: Allocation of ownership rights for any intellectual property developed by the founders or the company.
Assignment: Provisions for the assignment of intellectual property rights to the company.
6. Non-Compete and Non-Disclosure Agreements:
Non-Compete: Restrictions on the founders’ ability to compete with the company during and after their employment.
Non-Disclosure: Obligations to maintain confidentiality of the company’s proprietary information.
Right of First Refusal: Provisions granting the company or existing shareholders the right to purchase shares before they are offered to third parties.
Tag-Along Rights: Rights of existing shareholders to participate in the sale of their shares if another shareholder sells their shares to a third party.
8. Dispute Resolution:
Mediation: A requirement to attempt mediation before resorting to litigation.
Arbitration: A provision for binding arbitration to resolve disputes.
9. Termination and Dissolution:
Events of Termination: Circumstances under which the agreement can be terminated.
Liquidation: Procedures for the liquidation of the company’s assets and distribution of proceeds.
10. Miscellaneous Provisions:
Severability: A clause stating that if any provision of the agreement is found to be invalid, the remaining provisions will remain in effect.
Entire Agreement: A statement that the agreement constitutes the entire understanding between the parties.
Amendments: Procedures for amending the agreement.
Governing Law: The jurisdiction that will govern the interpretation and enforcement of the agreement.
Design Elements for a Professional Founders Shareholder Agreement
Clear and Concise Language: Avoid legal jargon and use plain language that is easy to understand.
Consistent Formatting: Use consistent fonts, spacing, and headings to improve readability.
Professional Layout: Use a clean and professional layout that is visually appealing.
Section Headings: Use clear and informative section headings to organize the document.
Numbering and Bullets: Use numbering and bullets to create a structured and organized document.
White Space: Use ample white space to improve readability and prevent the document from appearing cluttered.
Professional Binding: If printing a physical copy, use professional binding to give the document a polished appearance.
By carefully considering these key components and design elements, founders can create a Founders Shareholder Agreement that provides a solid foundation for their business and protects their interests. It is highly recommended to consult with an attorney to ensure that the agreement is legally sound and tailored to the specific needs of the company and its founders.
