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The first step to success is outlining the rules of the game. Our Toronto corporate lawyer can help you draft, finalize and enforce a founders agreement. Connect today.

The Essential Elements of a Founders Agreement

A founders’ agreement is an essential document that sets out various expectations and commitments between the founders in your startup. It deals with issues such as issuance of equity shares, vesting of those shares and what happens to those shares if a founder does not live up to expectations, leave or be terminated. The founders agreement serves as a blueprint for how the founders will run a business before they officially begin doing business together.

We help businesses craft detailed, fully-customized founders’ agreements that incorporate the following elements:

  • Initial capital contributions and other investments
  • The ownership structure
  • The roles and responsibilities of the founders
  • Voting and decision-making procedures
  • Vesting and restrictions agreement
  • Compensation and equity
  • Intellectual property ownership
  • Removal or departure of founders
  • Dissolution and termination
  • Dispute resolution, venue, and choice of law

For more information about founders Agreement, read our blog: What Should a Founders Agreement Include and Why Do You Need One?

Our Approach

A good founders’ agreement should be built on the founders’ vision for your company. As a result, we meet with you and your partners and listen to what you hope to achieve. We’re interested in more than just the big picture – we sit down with you to discuss and clarify a number of matters including:

  • The founders’ individual roles and responsibilities.
  • The business’s present ownership/share structure and how you will decide ownership as the company grows.
  • What each founder will contribute in terms of finances, assets, and opportunities.
  • The respective strengths of each individual founder.
  • Any internal or external challenges that you may face.

We use this information, leveraged with our experience, to create a founders’ agreement that provides structure, clarity, and protection for your new business. For more information about founders Agreement, read our blog: What Should a Founders Agreement Include and Why Do You Need One?

Founder to Founder – We Know What You Need

Khaled El Fauri has amassed a decade of experience in business and corporate law. As co-founder of an innovative solar energy company, he has lived the advice he shares with new businesses and their founders. After serving for more than seven years as general counsel to several large and multinational corporations, overseeing a wide range of legal affairs, Khaled has developed a unique perspective regarding the legal and business decisions that should be made in advance to help ensure the stability of a new company.

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Let’s start drafting a founder agreement customized to your startup so that you can get organized, raise money and gain credibility to expand your business.

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  • Meridian Credit Union, a leading financial institutionin Toronto, in a share subscription transaction in FinTech Startup that includes legal due diligence, software licensing, drafting of transactional documents and securities law compliance on matters such as private issuer and exemptions from prospectus.
  • Motusbank, a federally chartered online bank in Toronto, in standardizing the terms and conditions of the bank’s cloud-based services, including Saas agreements, software licensing agreements, click-wrap agreements, and other technology-related agreements for the use of the bank’s online users. 
  • Fincantieri, the largest naval shipbuilding group in the world, in naval ship IP design agreements, transfer of technology and licensing agreements negotiated and signed with several armed forces in the Middle East region to protect Fincantiari’s intellectual property rights.
  • Infrastructure Ontario‘s Request for Proposal Documents (RFPs) of the Go-Rail Expansion Project.
  • Infrastructure Ontario‘s Go-Rail Expansion project agreement, a single fully integrated contract using the Design-Build-Finance-Operate-Maintain (DBFOM) model.
  • Infrastructure Ontario’s Transit Oriented Communities (TOC) project agreements including term sheets, joint ventures, construction lease and option agreements with developers to jointly build mixed-use developments as part of Ontario Line subway project.
  • Infrastructure Ontario‘s Real estate matters such as expropriations/ collect and compete, land acquisition and disposition.
  • Jordan Aviation‘s major shareholder in an airline company, to conclude a US$26 million share acquisition transaction from a large international private equity firm and related escrow agreements with Citi Bank London.
  • Jordan Aviation’s major shareholder in an airline company, to conclude a US$10 million share acquisition transaction.
  • Jordan Aviation, in its set-up of an aviation fund of US$30 million. Established fund company, management and sponsor companies. Prepared investment management agreement and subscription agreement. Moreover, drafted dry lease contracts for aircrafts as part of the fund transaction.
  • Fincantieri, in the negotiation of a joint venture transaction with Al Zamil Shipyard in KSA for the design and construction of several offshore vessels and building of facilities for military and offshore vessels in the new King Abdul Aziz Port in KSA.
  • National Holding, in the acquisition by a German firm (Knauf) to 51% stake in National Holding’s subsidiary.
  • National Holding, in a joint venture transaction with Vivartia, a Greek holding group based in Athens.
  • National Holding, in a US$36 million acquisition by Qatari sovereign wealth fund to National Holding’s shares in a Steel Factory in Egypt.
  • National Holding, in a US$40 million capitalization in a home appliances factory in Jordan, with ownership restructuring.
  • Dubai Bank and Dubai Holding, a global conglomerate and sovereign wealth fund of the government of Dubai and its ruling family, in producing a due diligence report and structuring advise in respect of a US$300 million cross-border acquisition/ privatization in a state-owned Jordanian Bank.
  • Dubai Holding in producing four separate legal due diligence reports with respect to acquisition transactions totaling close to US$200 million in Eastern investment group holding UK, International Energy Management Company, Jordan Airline Training and Simulation (JATS) and Jordanian Flight and Catering Services Company (Subsidiary of Alpha Co. -UK);
  • Kuwait National Bank in producing a due diligence report with respect to acquisition transaction in Bank Al Etihad in Jordan.
  • National Holding, in several international procurement and sale of goods contracts and trade between countries that involved contract drafting and other banking documentations such as letter of credits, bank guarantees and other documents for shipping and handling of goods based on Incoterms Rules.
  • Fincantieri as part of the in-house legal team, in closing a US$5.6 billion naval shipbuilding contract signed with the Qatari Navy in 2016.
  • Fincantieri as part of the in-house legal team, in the negotiation of US$ multi-billion procurement contracts, to equip and arm newly ordered warships, with suppliers such as Airbus, Raytheon, MBDA, Rolls-Royce, Thales and Leonardo.
  • Eagle Hills, a leading real estate developer, in several hotels operation agreements with Marriott Inc to license the operation of several (5) stars hotels and resorts in the Middle East region including St. Regis Hotel and residences, W Hotel & Residences and Westin Hotel.
  • Engie, a French multinational power company, to structure the set- up and finance of a 150 MW solar power project in Jordan.
  • Fincantieri, in closing a complex “Engineering, Procurement and Construction” contract for a military shipyard in the UAE and related joint venture contract for the management and operation.
  • Fincantieri in a US$250 million refitting contracts of naval units (ISS, FOS, ILS) with several naval forces in the Middle East.
  • National Holding, in several international procurement and sale of goods contracts and trade between countries that involved banking arrangements such as letter of credits, bank guarantees and other documents for shipping and handling goods.
  • National Holding in the setup, design and construction of Greenfield cable factory in Algeria.
  • Damac Properties in providing contract drafting to construction, consultancy, plot and unit SPA related to US$ multi-billion real estate projects in Dubai, Abu Dhabi, Jordan, Egypt, Lebanon, KSA and the UK based on FIDIC, NEC and bespoke forms of contract.
  • Damac Properties as part of the inhouse legal team, in the negotiation of a US$ 250 million construction contract with Arabtec Holding to construct Damac’s 90 floors tower (Ocean Heights in Dubai Marina) in Dubai, UAE.

Founders agreement vs shareholders agreement

A founders’ agreement is an essential document that sets out various expectations and commitments between the founders in your startup. It serves as a blueprint for how the founders will run a business before they officially begin doing business together.

If you choose to incorporate right away, you may move directly to a more formal shareholders’ agreement, but often with a startup, you’ll want to test the water first before jumping in. Either way, each agreement provides certainty, which is essential at this stage.

Many startups that are looking for external capital funding may rely on a founders’ agreement until their first major round of funding, as the terms of a shareholders’ agreement will typically be heavily negotiated by the investors

What should be included in a Founders’ Agreement?

While there’s no formal structure for a founders agreement, here are some things you should consider including in your agreement:

  • Who owns what percentage of the business? 
  • Is the ownership percentage subject to vesting on the basis of continued business involvement and performance?
  • Who owns the intellectual properties?
  • Who is responsible for what?
  • Have any of the founders invested assets or cash in the company, and if so, when and how will it be accounted for?
  • If the founder leaves the company for whatever reason, does he or she have to return their shares to the company or to the other founders? 
  • At what price is this sale going to take place?

Is a Founders agreement legally binding?

The founders’ agreement is a legally binding contract that should encapsulate everything that is important to your business. You don’t want to rely on verbal agreements or rely on form documents – you want the agreement to memorialize the essential elements of your organization.

Do we need a Founders Agreement?

When people come together to form a business, there is often an atmosphere of optimism and excitement. The founders often have a clear sense of their roles, objectives, and ultimately what they will get out of the business. All of this may have been discussed at length, but in the absence of a written agreement, problems can arise in the future – problems that can ultimately jeopardize your business.

A clear founders’ agreement is vital to the future success of your business.