Simple Founders Term Sheet
for Startups & Entrepreneurs
What is a founders' agreement, and why is it so important?
A founders’ agreement is a legally binding document, signed by the Company’s founders (or a venture, before establishing a company), which determines the founders’ rights and obligations towards the Company and each other. The agreement covers various legal aspects such as the Company’s purpose, roles of the founders, commitments and representations, allocation of shares, repurchase rights, and more.
A founders’ agreement is like a prenup, and just like any relationship, everyone intends that everything runs smoothly. Nevertheless, things change, so it is in everyone’s interest to agree and decide on the “What If’s” now.
What other provisions would a founders’ agreement include that the SFTS does not include?
Depending on the jurisdiction and laws, founders’ agreement could contain no-sale provisions, prohibiting the sale of any shares of the Company owned by the Founders for a certain period of time, a broader language around repurchase, preemptive, rights of first refusal, etc.
Where can I read more about founders’ agreements?
We have published two posts on founders’ agreements, which you can read here. You can also refer to our SFTS explanation, which can be found here or write to us using the contact page, and we will do our best to answer shortly or to post your question and our feedback on our Facebook page.
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